Value investing is as simple as ABC if investors understand the fundamentals of value investing. The ABCs of value investing is: Assets, Bargain and Catalyst. In simple terms, buy companies that boast real and measurable assets, selling at a bargain price and the ability of the value of the business to increase due to a catalyst.
If an investor buys a company at a huge margin of safety (bargain), one can profit even if a catalyst does not come about. The reason is that as the market moves toward efficiency (reverts back to the mean) and stock prices come to reflect a company’s true value, the investor realizes a significant gain. The catalyst becomes an added bonus to the investor.
Thus, always keep in mind the ABCs of value investing!
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