Chapter 1
An Introduction to Value Investing
In This Chapter
Defining value investing
Brushing up on value investing math
Deciding whether you're a value investor
No doubt, somewhere during your investing career you've heard something about value investing. You may know it's “what Warren Buffett does,” or maybe you've seen mutual funds described as “value-oriented.” You have a pretty good idea what the word value means in ordinary English, but how does it apply to investing? What is value investing, anyway? This chapter answers that question and helps you decide whether you're a value investor at heart.
What Value Investing Is — And Isn't
Broadly defined, value investing is an investing approach and style blending many principles of business and financial analysis to arrive at good investing decisions. To be more specific, value investing is buying shares of a business as though you were buying the business itself. Value investors emphasize the intrinsic value of assets and current and future profits, and they pay a price equal to or less than that value.
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Note the key phrases “buying ...