Value Investing is an Investment technique that involves buying securities that appear to trade for less than their intrinsic or book values. The value investors seek out for these type of securities that are undervalued by doing some form of fundamental analysis.
The value Investing concept was first taught by Benjamin Graham and David Dodd at Columbia Business school and later developed in their books 'Security Analysis' and 'The Intelligent Investor'.
So here are 25 best quotes on Value Investing with commentary and explanation.
1. Price is what you pay, value is what you get.
- Warren Buffett
Price and value are not always the same and understanding the differences between then is the basic principle of value Investing.
For eg:- You bought a laptop from the store at 480 today at discount of 20%. The next day your friend went to buy the same laptop at the same store but he had to pay 600 because there was no discount on that day.
So here the value of the both laptops is same but you both have paid different prices for it.
2. Value Investing is the discipline of buying securities at a significant discount from their current underlying values and holding them until more of their value is realized. The element of a bargain is the key to the process.
- Seth Klarman
3. The secret to Investing is to figure out the value of something and then pay a lot less.
- Joel Greenblatt
In theory the Value Investing could be as simple as that but it takes effort and time to master the art of learning and understanding the actual value of a stock or a company.
4. In the short run the market is a voting machine but in the long run it is a weighing machine.
- Benjamin Graham
A sudden popularity of the stock may shoot its prices to the sky in the short time. But in the long run the prices would come down to it real value based on its fundamentals.
5. If you can remember that stocks aren't pieces of paper that gyrate all the time- they are fractional interests in business. It all makes sense.
- Seth Klarman
Most of the people buy a stock and then they keep looking at the price everyday to see if they are doing well or not. Seth Klarman says that the Investors have to understand that they are buying a part of a business, an ownership in a business. If the business does well, they too will do well.
6. The intelligent Investor should recognize that market panics can create great prices for good companies and good prices for great companies.
- 'The Intelligent Investor' book
The market panics can create ideal conditions for the value Investor to buy stocks using value Investing principles.
7. All intelligent investing is value Investing - acquiring more than you are paying for.
- Charlie Munger
Value investing is intelligent Investing because you are buying something for less than it's worth.
8. Being a value Investor means you look at the downside before looking at the upside.
- Li Lee
Being a value Investor, the first thing you have to consider are the risks that are involved in an investment. Li lee says that " Before becoming an Investor you need to look at how you can fail at this game. There are all sorts of ways you can fail. You need to examine who you are and see if you could be good at it."
9. We don't have to be smarter than the rest. We have to be more disciplined than the rest.
- Warren Buffett
For being a successful value Investor, having discipline is more important than having intelligence.
The discipline to have opinions and conclusions about a stock being unaffected by others opinions and conclusions.
The discipline to say no for the stocks you don't feel confident about even though everyone is trying to turn you into saying yes.
Warren Buffett once said, " If you've got 160 I.Q , sell 30 points to somebody else because you won't need it in Investing. What you need is the right temperament. You need to be able to detach yourself from the views of others or the opinions of others. You need to be able to look at the facts about a business unaffected by what other people think. That is very difficult for most people."
10. In essence, the stock market represents three separate categories of business. They are adjusted for inflation, those with shrinking intrinsic value, those with approximately stable intrinsic value, and those with steadily growing intrinsic value. The preference always would be to buy a long-term franchise at a substantial discount from growing intrinsic value.
- Michael Burry
According to Michael the stock market is categorized in three categories viz.,
1. Stocks with decreasing intrinsic value
2. Stocks with stable intrinsic value.
3. Stocks with steadily increasing intrinsic value.
Michael suggests investors to buy stocks with steadily growing intrinsic value at a price which is lower than their actual intrinsic value.
11. We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an Investor thinks about a business and the comfort level he must feel with its economic characteristic before buying into it.
- Warren Buffett
If an Investor understands the business, the risk involved in an investment is significantly reduced.
Through portfolio concentration, you can focus on only few stocks and it will increase your intensity and time of focus understanding about the economic characteristic of those few stocks and thus reduce the risk associated with the investment.
12. I never ask if the market is going to go up or down because I don't know and besides it doesn't matter. I search nation after nation for stocks, asking 'where is the one that is lowest priced in relation to what I believe it's worth ? Forty years of experience have taught me you can make money without ever knowing which way the market is going.
- John Templeton
According to John Templeton (a British Investor and fund manager), by using value Investing principles an Investor can make money even without knowing the direction of the market.
13. I stopped wasting time on what people claimed a stock was worth and started looking at numbers.
- Irving Kahn
To win in stock market, an Investor needs discipline to form their own opinions and conclusions based on the facts and numbers that are available.
14. A great company is not a great investment if you pay too much for the stock.
- 'The Intelligent Investor' book
Even a great company is worth buying only when their prices are reasonable. Benjamin Graham suggests to use 'Margin of safety' - a principle in which an Investor buys stock only when their market price is significantly below their intrinsic value.
Thus an Intelligent value Investor never overpays for any stock, no matter how exciting the investment seems to be.
This way you can minimize your odds of error or we can say minimize your loss when you are wrong.
15. The stock market is filled with individuals who know the price of everything, but the value of nothing.
- Philip Fischer
As stated earlier- price is not equal to value. The price of the stock may be higher but the actual value of the stock could be quite less. So here Philip Fischer stress the importance of knowing the true value of the stock rather than its price.
16. Mr. Market does not always price stocks the way an appraiser or a private buyer would value a business. Instead, when stocks are going up, he happily pays more than their objective value; and when they are going down, he is desperate to dump them for less than their true worth.
- Benjamin Graham
Most of the time, the market is mostly accurate in pricing most stocks. But sometimes the companies are not valued at a right price and few times at a very wrong price.
This metaphor of Mr. Market given by Benjamin Graham explains how stocks can get mispriced and create circumstances where the value Investor could benefit from.
17. The intelligent Investor is a realist who sells to optimists and buys from pessimists.
- Benjamin Graham
In the book "The Intelligent Investor", Benjamin Graham says that the market is a pendulum that forever swings between unsustainable optimism (a tendency to expect the best) and unjustified pessimism (belief that bad things will happen).
So the intelligent Investor is a realist who sells to optimists (people who makes stock too expensive) and buy from pessimists (the people who makes the stocks too cheap).
18. As value investors, our business is to buy bargains that financial market theory says do not exist. We've delivered great returns to our clients for a quarter century - a dollar invested at inception in our largest fund is now worth over 90 dollars, a 20% net compound return. We have achieved this not by incurring high risk as a financial theory would suggest but by deliberately avoiding or hedging the risks that we identified.
- Seth Klarman
'Efficient-market hypothesis' commonly known as 'financial market theory' that states that 'asset prices fully reflect all available information and it is impossible to beat the market consistently on a risk-adjusted basis.'
'The stocks always trade at their fare value making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices.'
'The only way an Investor can possibly obtain higher returns is by chance or by purchasing riskier investments.'
Value Investor Seth Klarman disapproves this theory and states that using value Investing principles he have earned great returns for his fund as a fund manager without incurring any high risk.
19. I don't believe all this nonsense about market timing. Just buy good value and when the market is ready that value will be recognized.
- Henry Singleton
It is difficult to time the market as the stocks could be trading for a long time below their intrinsic value before realizing their true value. Therefore to be a successful value investor, timing the market is not important and you just have to keep patience after buying an undervalued stock.
20. No matter how careful you are, the one risk no investor can ever eliminate is the risk of being wrong. Only by insisting on what Graham called the "Margin of Safety" - never overpaying, no matter how exciting an investment seems to be- can you minimize your odds of error.
- 'The Intelligent Investor' book
Margin of safety is the difference between the intrinsic value of a stock and its market price.
This is the core principle of value investing philosophy.
Using Margin of safety, an investor buys a stock when it is worth more than its price in the market. This difference between value and price protects the investor from risk of poor decisions and downturns in market and therefore reducing the odds of error.
21. We go where there is value, not where everyone else goes. Sometimes the best value is where no one else is at.
- David Herro
As a value investor, most of the time you have to be against the crowd. Buying a stock when it is down and no one else is buying or selling at a price when it is going higher and everyone is buying.
22. I think you have to learn that there's a company behind every stock and there's only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.
- Peter Lynch
Many people trading stocks forget or ignore the fact that what they are trading are actually a part of an enterprise. In the long run, the stocks go up only because the enterprise or the business does well. The value of the stock grows when the value of the business grows.
23. Investing isn't about beating others at their game. It's about controlling yourself at your own game.
-Benjamin Graham
Investing requires self-discipline. Self-discipline of controlling yourself from buying high just because everyone is buying and selling low just because everyone is selling.
Intelligent Investing is knowing the true value of a stock and then paying a lot less. You can't control market behaviour but you can control yours.
24. Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down.
- Warren Buffett
Quality comes at a high price but by using value investing principles you can buy quality stocks when they are on a sale.
25. We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessman. Thirty years ago, no one could have foreseen the huge expansion of the Vietnam war, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4 %. But, surprise none of these blockbluster events made the slightest dent in Ben Graham's investment principles. Nor did they render unsound the negotiated purchases of fine businesses at sensible prices. Imagine the cost to us, then, if we had let a fear of unknowns cause us to defer or alter the deployment of capital. Indeed, we have usually made our best purchases when apprehensions about some macro event were at a peak. Fear is the foe of the faddist, but the friend of the fundamentalist.
- Warren Buffett
Warren Buffett wrote this to his Berkshire Hathway shareholders in annual report in 1994.
These were 25 best quotes on value investing.
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