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Value investing – The Warren Buffet Way

What is value investing?Value investing involves investing money in stocks and securities that are sold lower than the intrinsic value. Warren Buffet’s style of investing involves tenets one should consider before investing.They are broadly classified into• Business• Management • Finance• ValueHere’s a look at how to become a smart investor, the Warren Buffet way!

Business Principle• Is the company’s line of business simple and

understandable?• Does the company have a good history and financial

stability over the years?• Is the company in a position to withstand unforeseen

circumstances and does it have a potential to grow?

Management Principle• Does the company have a strong management that

takes good business decisions?• Are the past reports void of window dressing and is

the company true to its shareholders?

Financial Principle• Does the company have a good profit margin to the

extent that even if there is a slight dip in profits, shareholders do not suffer any major losses?

• Calculate the Return On Equity of the company. Make sure the ROE ratio is high and the Price to Earnings ratio is low.

Value Principle• What is the intrinsic value of a share? • Can the shares be purchased at a discount on market

price so that there is a margin of safety?

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