We think the very term “value investing” is redundant. What is “investing” if it is not the act of seeking value at least sufficient to justify the amount paid?

—Warren Buffett, 1992, letter to Berkshire Hathaway shareholders

One man’s trash is another man’s treasure. It’s an old adage because it’s true. Although the dichotomy between trash and treasure is a bit extreme, it does point out that not everyone has the same understanding of “value.” There are many different measures of value, and it is worth taking a step back to distinguish one from another so we can speak in common terms.

This chapter discusses the meaning of value in the context of the valuation process. We discuss what is meant by different ...

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