The 1-2-3 of Value Investing

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The value investor’s strategy for choosing the right stocks

Link: The value investor’s strategy for choosing the right stocks

Quote: “Most value investors hold portfolios of 20 to 30 stocks. Holding this number of stocks allows them to know a lot about these companies – in depth. Whereas in a (typical non-value) portfolio of 100 to 200 stocks, it is quite unlikely that a portfolio manager will know a lot about all the companies.”

Extract:

  1. Value investors believe that when they buy a stock, they buy a piece of the company,  they buy as owners.
  2. Value investors believe that the stock market moves up or down many times irrespective of fundamentals.
  3. Value investors always look for a margin of safety. The margin of safety protects an investment’s downside.