Value Investment and Tenets of Value Investing

Value investing is all about buying stocks with low P/E ratios which has more to do with the balance sheet than the income statement. Value investing can be described as purchasing a stock for less than its calculated value.

Moreover some people define Value investing in different way as they say Value investment is philosophy that favors the purchase of stocks that are currently selling at low price-to-book ratios and have high dividend yields.

Tenets of Value Investing

A true investment requires a margin of safety that may be provided by a firm’s working capital position, past record of earnings performance, land assets, economic goodwill etc.

For the successful business it is necessary to know the difference between the market price of a share and the intrinsic value of that share which is wide enough to get profitable investments.

Another tenet of Value Investing can be Value investing requires the calculation of an intrinsic value that is independent of the market price.