Value Investing

Value Investing is a strategy of investment, made famous by Warren Buffett, a legendary billionaire investor who is one of the richest men in America. Its underlying philosophy is contrarian in nature. As what Warren Buffett said:

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

In a nutshell, a value-oriented investor will buy a stock when its stock price is below its underlying (intrinsic) value. This will happen when the stock market behaves irrationally (fear), thus selling down the stock price to a bargain level. On the flip side, a value-oriented investor may sell a stock when its stock price is above its intrinsic value. Again, this will happen in an irrational (greed) market when stock prices get bought up to a very exorbitant level. However, more often, a value-oriented investor will hold the stock for the long term, collecting dividend payments indefinitely if possible. Also, unlike other investment strategies, Value Investing neither attempts to predict or estimate future stock price movements nor try to buy or sell stocks at the ?right? time.

Value Investing is easy to understand in principle, but difficult to implement in practice. This is due to the tendency of human nature to gravitate towards irrationality, namely fear and greed.

It?s beyond our scope to impart to you the art and science of Value Investing in detail – there are many books which can do this job far better than us. Below are the ones which we have read and recommend to you:

We find this book useful in explaining the qualitative aspect of Warren Buffett?s investment strategy. It is more about the art of Value Investing and less about the science of Value Investing. We believe that Value Investing is both an art and a science and a grasp of both of them is important for a full understanding of it. For the more quantitative aspect of Value Investing, please refer to our next book recommendation.
This book covers the quantitative aspect of Value Investing, which is a nice complement to the previous book- The New Buffettology. Compared to the previous book, it is more about the science of Value Investing and less about the art of Value Investing. Those who love numbers may prefer this book. A basic understanding of accounting and the stock market will be very helpful in understanding the materials presented.
If you want to see Value Investing at work in real-life, then this book is for you. The author, Peter Lynch, was the legendary value fund manager of the Fidelity Magellan Fund. During his thirteen successful years over there, his fund was the top-ranked general equity fund in the United States. One thousand dollars invested in Magellan in 1977 was worth $28,000 when he handed over the reins of Magellan on May 31 1990. In this book, you will get to see he went about performing the art of stock picking.