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How to Value Shares and Outperform the Market by Glenn Martin

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5. My New Approach to Value Investing

The sources of value

I described in chapter 3 what I believe to be the practical or theoretical weaknesses of the current approaches to identifying good-value shares. My dissatisfaction with these approaches led me to develop a new valuation system, one which is grounded in the realities of equity investment.

The over-riding share valuation principle is that the current intrinsic value of a share depends on what is likely to happen in the future rather than on what has happened in the past. Stock markets always look forward rather than backwards. Shares are valued on the basis of future prospects rather than on past performance. As Simon Thomson wrote in Trading Secrets, ‘The stock market is a forward-looking ...

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