Value Investment - buying good businesses at a bargain price
BENJAMIN GRAHAM QUOTES
A stock does not become a sound investment merely because it can be bought at close to its asset value. The investor should demand, in addition, a satisfactory ratio of earnings to price, a sufficiently strong financial position, and the prospect that its earnings will at least be maintained over the years.
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There is a close log
ical connection between the concept of a safety margin and the principle of diversification. One is correlative with the other.
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a sufficiently low price can turn a security of mediocre quality into a sound investment opportunity— provided that the buyer is informed and experienced and that he practices adequate diversification.
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The enterprising investor may confine his choice to industries and companies about which he holds an optimistic view, but we counsel strongly against paying a high price for a stock (in relation to earn-ings and assets) because of such enthusiasm.
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We greatly doubt whether the man who stakes money on his view that the market is heading up or down can ever be said to be protected by a margin of safety in any useful sense of the phrase.
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