Feb 15 2009
View Investing in Equities as Buying the Business, Not the Stock
Investing in value equities should be treated as buying part ownership of these businesses. It requires the same careful consideration. The value investor should determine the company’s true worth (its assets and the wealth it could generate). This is sometimes described as the company’s intrinsic value. If we are looking at an asset-rich company, this value is what can be turned into cash if liquidation occurs. If we are looking at an earnings-rich company, this is the value realized by any excess returns expected compared to the returns of long-term treasury bonds. The message is: Value investors should think of buying the business, rather than the stock. The price and business value are all that should matter.
