Buy value for a margin of safety by Steven Nichols, co-founder of Warnke/Nichols Ltd. Investment Management
Stock market volatility, particularly on the downside, has reinforced the notion that investors should adopt a philosophy to limit the risk of permanent capital loss – that is, paying too high a price and being forced to sell for a loss.
To both limit principal risk and achieve satisfactory long-term investment returns, there is no better approach than value investing.
Value investing is the process of buying stock in a company at a price substantially below its estimated worth, to achieve the highest return on invested capital, consistent with preservation of capital. The estimated worth of a business– its intrinsic value – is the present value of all the cash the business produces in its lifetime.
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