| First off, what is the definition of value investing? | | | | years makes a good candidate. The companies must |
| Value investing is an investment strategy or approach | | | | be proven, successful businesses to be considered |
| where the investor buys a stock that is selling below | | | | for investment. |
| the company's true value, or underpriced. Value | | | | 3. Survivability- Ask yourself, "Will this company be |
| investors buy discounted stocks with the belief that | | | | around in 10, 20, 30 years?" If you cannot see the |
| the price will reflect the company's true value in the | | | | company being around in ten years, you have no |
| future. Value investing goes against the herd that | | | | business investing in their stocks; after all, you are |
| chases the hottest, fastest rising stocks of the | | | | buying a piece of that company. Say you and three |
| moment for a longer-term ride of returns. | | | | of your friends want to buy a new $1200 HD-TV. |
| The most famous value investor (and richest person) | | | | Would you want to pay $400 for your stake if you |
| in the world is Warren Buffett, who has generated | | | | thought the TV was going to die in two years? I |
| over 20% average annual returns since the 1970's. | | | | hope not. |
| He has prided himself on finding "good deals" on good | | | | 4. Uniqueness- What is unique about this company? |
| businesses. This stock investing strategy was mostly | | | | Do they have some kind of competitive advantage? |
| created by one of Buffett's teachers, Benjamin | | | | Are they better at some aspect of the business |
| Graham. He wrote a book on value investing called | | | | versus the industry? Are they the first in a market? |
| The Intelligent Investor. This 600+ page book, much | | | | Do they have any special patents, copyrights, or |
| like a textbook, gets into the nitty gritty details of | | | | trademarks? These are the kinds of questions to |
| his investing strategy and how he came up with it. | | | | answer when finding out about a company. |
| Basics of Value Investing | | | | This article should give you something to work on for |
| 1. Find a Great Company- Whether it's a company | | | | a little bit. Stock investing can be confusing and |
| you buy products from, buys products from you, | | | | difficult. Just slow down and think of some really |
| employs you, or if you just love the company, check | | | | great companies that you'd be willing to OWN not |
| it out. Also, if it's in an industry that you know very | | | | just hold the stocks of. Remember, value investing is |
| well than you should look into it. You want to love | | | | all about finding good, solid companies that are priced |
| the company you are going to own. It has to be | | | | below their true value. |
| GREAT, not just good or okay. | | | | Stay tuned for Part II because I will be posting more |
| 2. Proven Business- How long has this company been | | | | on Value Investing Basics. Congratulations! You now |
| around? It's hard to value a company when it has | | | | know the groundwork that value investing in stocks |
| only been in business for a year. Usually a company | | | | is all about. Making you a better, more informed |
| that has been successfully in business for 10 or 15+ | | | | investor is my goal. |