16. The Value Investing Process

Value investing is a strategy for investors willing to take a contrarian position and buy stocks that most investors are selling.

Concentrate on the Strongest Candidates

By March 2001, the market, especially for tech stocks, was in the pits. But graphics chip maker Nvidia was riding high. Microsoft had selected the new Nvidia chip for its Xbox video game machine, which was expected to be a blockbuster. Nvidia had just penetrated the Mac market for the first time. Nvidia reported January quarter sales up 70 percent, and its January fiscal year earnings had soared 137 percent.

Much of Nvidia’s success had come at the expense of competitor ATI Technologies. Although it was still outselling Nvidia, ATI’s sales slumped ...

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