"The Price is, What you pay.
The Value is, what you get."
- Warren Buffett
"The Price is, what you pay.
The Value, is what you get."
- Warren Buffett
Modern Value Investing according to Buffett & Munger
Whereas in classical value investing according to Benjamin Graham, the undervaluation of a company alone was decisive for a purchase, Graham’s disciple Warren Buffett, together with his partner Charlie Munger, expanded the strategy to include other influencing factors.
The result was a more modern variant of value investing, on whose basic principles we also make our investment decisions. In addition to an attractive valuation, the factors considered include a high-quality business model, long-term competitive advantages and future growth prospects.
How does value investing work?
What returns are possible?
Why doesn't everyone invest according to this strategy?
Investment proces
How a company makes it into our portfolios
Step 1
Analyse
In order to get to know a potential company inside and out, we research for months. In addition to hard facts such as balance sheets and key figures, we are particularly interested in soft factors that cannot be measured by numbers. Among other things, we attach importance to:
- the quality of the business model,
- the competence of the management,
- unique competitive advantages,
- Talks with (ex-)employees, suppliers and customers
Step 2
Valuation
In the next step, we determine the “actual” value of the company and compare it with the current price (= share price).
If the price is below the actual value, we exploit the difference for an investment, as we assume that the share price will adjust to the actual value in the long term. True to the motto “The price is what you pay. The value is what you get.
Step 3
Monitoring
Once a stock has made it into our portfolios, we keep a close eye on our investment in order to react to changes in the competitive environment, management, or stock price.
If the price of a share drops, but we remain convinced of the company, we may use the drop in price to buy even more of the stock at a bargain price.
Risk management
Safety margin" concept
Our risk management already starts with the selection of our companies. We prefer to invest in companies that have already been able to survive major crises unscathed in the past or have sufficient liquid assets to master future ones as well.
In addition, the “safety margin” concept ensures that each share in your portfolio has a sufficient safety cushion.
This cushion is created by the difference between the share price and the actual value of the company. The more undervalued a company is according to our analyses, the more likely it is to weaken (for example in times of crisis) in order to still be profitable.
The advantages of our strategy
- Investment in outstanding companies
- Concentrated approach enables out-performance
- Most proven investment strategy over the long term
- Risk management according to the "safety margin" concept
