📘 Value Investing: Finding Undervalued Companies
Chapter 1: What is Value Investing?
Strategy: Buy stocks trading below intrinsic value.
Philosophy: “Price is what you pay, value is what you get.” – Warren Buffett.
Long-term focus, patience, discipline.
Chapter 2: The Origins of Value Investing
Benjamin Graham: “The Intelligent Investor.”
David Dodd: Co-founder of value methodology.
Warren Buffett: Modern icon of value investing.
The evolution from deep value to quality value.
Chapter 3: Intrinsic Value – The Core Concept
Definition: True worth of a company, independent of market price.
Methods to estimate intrinsic value:
o Discounted Cash Flow (DCF).
o Earnings power value.
o Asset-based valuation.
Chapter 4: Margin of Safety
Buy with a cushion below intrinsic value.
Protects against errors in valuation.
Historical examples of margin of safety saving investors.
Chapter 5: Key Valuation Metrics for Value Investors
Price-to-Earnings (P/E).
Price-to-Book (P/B).
Price-to-Sales (P/S).
Dividend yield.
Free Cash Flow yield.
PEG ratio.
Chapter 6: Spotting Undervalued Stocks
Market overreaction (bad news, short-term problems).
Cyclical downturns creating bargains.
Misunderstood industries.
Hidden assets on balance sheets.
Chapter 7: The Role of Financial Statements in Value Investing
Balance sheet strength.
Consistent earnings.
Strong cash flow.
Low debt levels.
Case study: Apple’s transformation in the 2000s.
Chapter 8: Contrarian Investing
Going against the herd.
Why most investors hate undervalued stocks.
Example: Buying banks during the 2008 crisis.
Chapter 9: Common Traps in Value Investing
Value traps: cheap stocks that stay cheap.
Declining industries (newspapers, coal).
Management issues.
Overestimating “turnarounds.”
Chapter 10: Patience – The Value Investor’s Edge
Market can stay irrational longer than expected.
Holding for years until value is recognized.
Buffett’s Coca-Cola example.
Chapter 11: Famous Value Investors & Their Lessons
Benjamin Graham – discipline.
Warren Buffett – quality at a fair price.
Charlie Munger – mental models.
Seth Klarman – risk management.
Chapter 12: Value vs Growth Investing
Value: undervalued, often slower growth.
Growth: companies reinvesting earnings, high P/E.
The blurred lines: quality growth at reasonable price.
Chapter 13: Tools for Value Investors
Stock screeners with P/E, P/B, FCF filters.
Annual reports & SEC filings.
Websites: Morningstar, GuruFocus, Seeking Alpha.
Chapter 14: Case Study – A Real Value Play
Example: Ford Motor after 2009 crisis.
Cheap valuation vs survival risk.
Long-term payoff for disciplined investors.
Chapter 15: Key Takeaways
Value investing = patience + discipline + rational analysis.
Intrinsic value and margin of safety are central.
Not every cheap stock is a bargain.
Long-term wealth comes from buying quality below value.
