VALUE INVESTING AT BESTINVER
We devote all our efforts to analysing the market in a search for opportunities, identifying and investing in those companies where their real value is higher than their price on the market.
Value Investing
What is value investing?
Value investing is an investment philosophy that seeks to consistently generate positive returns in the long term. This approach was founded in 1928 by Benjamin Graham and David Dodd and taught in their classes at Columbia Business School.
This investment philosophy, which was popularised by Warren Buffett, a disciple of Benjamin Graham and possibly one of the greatest investors of all time, is based on the acquisition of high-quality securities at a price below their intrinsic or real value. The difference between the price of a security and its intrinsic value is what Graham defined as the margin of safety, a fundamental concept in the value investing philosophy.
«Rule number one: Never lose money. Rule number two: Never forget rule number one.» – Warren Buffett
Bestinver's Value investing
Finding long-term returns is our objective. We strongly believe that the best way to achieve this is by investing in equities with a philosophy based on value investing and a long-term time horizon.
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PRICE–VALUE CONVERGENCE PROCESS
Share prices, in the long term, will tend to represent the real value of a company. This convergence process between the price and the value is what generates the profitability that we expect.
Value and price
The intelligent investor must be able to distinguish between what are variations in the real value of a company and what are simply fluctuations in its price.
An investor who has a long-term time horizon can benefit from value investing, by choosing good companies, acquiring them at a good price and waiting patiently for the price to converge with the intrinsic value of the company.
History shows us that this is an effective method of generating returns above market levels.
Basic concepts for fundamental investing
Value investing combines qualitative and quantitative factors. It seeks sound understandable businesses, with barriers to entry, long-lasting competitive advantages and good management teams that are aligned with their investors, at attractive prices.
To determine the value of an asset, value investors use fundamental analysis and evaluate various businesses using ratios such as the price/profit ratio (people used to use the price/book value ratio) and the adjusted value of discounted cash flows.
Robust portfolios, with wide margins of safety, protect value investors from both the volatility of markets and possible investment mistakes.
What fund managers with a value investing philosophy have in common is the systematic application of fundamental analysis, investments in high-quality businesses with a wide margin of safety and a long-term vision.
Price is what you pay. Value is what you get. – Warren Buffett
