The Business of Value Investing: Six Essential Elements to Buying Companies Like Warren Buffett

Chapter 10. More Than One Way to Find Value: CASE STUDIES SHOWING THE APPROACH AT WORK

The individual investor should act consistently as an investor and not as a speculator. This means that he should be able to justify every purchase he makes and each price he pays by impersonal objective reasoning that satisfies him that he is getting more than his money's worth for his purchase.

—Benjamin Graham

So far, the goal of this book has been to alert investors to the ways in which a value-oriented investment mind approaches investing. Tell people that your investment approach entails buying 50-cent dollars and investing with a high margin of safety and, presto, you're a value investor. But saying something isn't the same as doing it. It's time to do now.

This chapter presents three case studies that illustrate how to approach investing in an intelligent, businesslike fashion. They are examples of why a value-oriented investment approach makes sense. Each case study presents a different way to determine that the company under investigation is indeed a bargain investment opportunity at the time.

• Case Study #1: Sunrise Senior Living. Back in 2002, this provider of managed care for the elderly was showing strength in an industry that appeared to be weakening. The company's business strategy was twofold: (1) by developing and selling premium assisted living properties, Sunrise was making profit on real estate sales and (2) managing assisted living properties, thus using its expertise to provide ...