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Tag: Value investing

Warren Buffett’s Advice On How To Value A Business

Warren Buffett’s Advice On How To Value A Business

Warren Buffett has been investing in stocks since his teenage years. Over the past seven decades, he’s bought and sold thousands of stocks across sectors and industries accumulating hundreds of billions of dollars in value for himself and his investors along the way. During his lengthy career, Buffett has become skilled at calculating intrinsic value, the underlying value of a business based on its fundamentals. Warren Buffett: Starting with the cash flow statement The exact process Buffett uses varies from…

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Lessons From The Charlie Munger Partnership

Lessons From The Charlie Munger Partnership

Before he became Warren Buffett’s right-hand man at Berkshire Hathaway, Charlie Munger ran his own investment partnership where he established an impressive track record for himself. In fact, the Munger partnership performance earned him a place in Warren Buffett’s now-famous essay, The Superinvestors of Graham and Doddsville: “ … is the record of a friend of mine who is a Harvard Law graduate, who set up a major law firm. I ran into him in about 1960 and told him…

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Seth Klarman On Catalysts In Value Investing

Seth Klarman On Catalysts In Value Investing

One of the most frustrating scenarios to be faced with as an investor is a stagnant stock price. You’ve done all the hard work, analysed the company correctly, invested at a deep discount to intrinsic value and waited patiently only for the stock to trend sideways for years. In areas of the market where mispricings are most common, particularly in small-cap and micro-cap stocks, this scenario is all too common. It can take years for a stock to close the…

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Seth Klarman: Approach Investing With a “Strict Standard of Risk Avoidance”

Seth Klarman: Approach Investing With a “Strict Standard of Risk Avoidance”

Investing is hard. To be able to outperform the market consistently, you need to be able to predict the future. Unfortunately, predicting the future is impossible. So, investing is a game of probabilities. Estimating the probabilities of individual outcomes and then investing in the scenario with the highest likelihood of success. As it is impossible to predict the future, it is best to include a wide margin of safety in the calculation of the probabilities. First proposed by Benjamin Graham,…

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Negative Shareholder Equity Isn’t All That Bad After All

Negative Shareholder Equity Isn’t All That Bad After All

In many respects, the style of value investing is built around shareholder equity and book value. Benjamin Graham and David Dodd built their net-nets investment strategy on book value, with the logic that if you could buy a stock for less than liquidation value, you would make money. Since Graham and Dodd published their landmark text, Security Analysis in 1934, many other studies have reached the same conclusion, particularly the research by Eugene Fama and Kenneth French. However, over the past two…

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Losing It All Pt.4: Benjamin Graham

Losing It All Pt.4: Benjamin Graham

No series on the mistakes of the world’s greatest investors would be complete without looking at the mistakes made by the Godfather of value investing Benjamin Graham, in the early part of his career. Losing It All Pt.3 Losing It All Pt.2 Losing It All Pt. 1 Graham survived the 1929 crash but only just, and in the years after, he re-built his investing methods around what he had learned at the time and compiled these lessons into his first book,…

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Dhando Investing

Dhando Investing

Mohnish Pabrai’s excellent book on investing The Dhandho Investor, (which I’m currently in the process or re-reading) should be required reading for all investors. This book is not a how-to investment guide, nor is it particularly focused on stock market investing at all. Instead, it is primarily a guide to the concept of Dhandho (pronounced dhun-doe). Every investor and business operator should understand the concept of Dhando. As Pabrai describes in his book, Dhandho is a Gujarati word, which when literally translated means…

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How To Invest Like Charlie Munger

How To Invest Like Charlie Munger

Charlie Munger is Warren Buffett’s right-hand man and also an accomplished investor in his own right. Warren Buffet is known as the world’s greatest investor and it can be said that Munger is the investment world’s most exceptional thinker. Indeed, it was Munger that inspired Buffett to change his strategy away from value towards quality, and ever since he joined Berkshire Hathaway, Charlie has proven himself to be a highly valuable filter of ideas for Buffett. “Opportunity cost is a…

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Is The Illiquidity Premium Worth It?

Is The Illiquidity Premium Worth It?

Alternative investments, such as private equity and private debt, generally require investors to commit funds for a specified lockup period. The lack of liquidity is usually compensated for with the illiquidity premium, which provides compensation for the associated loss of investment flexibility. But is this premium worth the added risk? Is the illiquidity premium worth its extra returns?  A recent report from Morgan Stanley suggests not. Indeed, according to the report, compiled by analysts Martin Leibowitz and Anthony Bova, over the period 1990…

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Warren Buffett’s 5 Most Valuable Investment Quotes

Warren Buffett’s 5 Most Valuable Investment Quotes

Five of the most valuable pieces of investment advice Warren Buffett has given over the years. These quotes don’t really need much of an explanation, they speak for themselves. They almost entirely sum up Buffett’s investment strategy in less than 1,000 words. I believe that it’s always worth going back to investment advice like this from Buffett, Munger or Graham on a regular basis to refresh my memory and make sure I’m not drifting off track. Warren Buffett Describes How…

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