The Third Pig

More Tenets of Value Investors

Posted by Ben Taylor on July 25, 2008 10:47 AM

Stacking ChipsValue investors worry that they might be wrong. So they add a belt in addition to suspenders. Drawing on the point that prices are different than values, value investors insist on as large a favorable margin of difference between price and value as possible. Doing so produces a margin-of-safety against judgment of error.

Value investors invest only in the stock of companies known to be faithful stewards of investor capital. They seek proven track records of good judgment and fair treatment by management.

Few companies live up to the requirements of value investors when the philosophy is strictly applied. Thus few companies make it into the portfolios of value investors. It is far safer to make the error of omission than to make the error of inclusion.

Value investors view themselves as owners of a business, not simply owners of a stock. It requires a long-term view and means avoiding the rapid-fire buying and selling characteristic of the vast majority of investors.

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