Knowing what a business, an asset, is worth and what determines that value is a prerequisite for intelligent investment - in choosing investments for a portfolio, on deciding the appropriate price to pay for a share of a publicly traded company, and in making choices when running a business. Value investors believe they can make reasonable estimates of value for most businesses. You could ask the question, if you are buying shares why worry so much about the value of the businesses? The answer lies in what Benjamin Graham said: that every corporate security may best be viewed, in the first instance, as an ownership interest in, or claim against, a specific business enterprise. Understanding valuation will further allow the intelligent investor to identify and understand value creation - a necessity for choosing investments that have a greater chance of yielding better that average returns over the long term (i.e. identifying businesses with growth potential - with a sustainable competitive advantage).
It is true that some assets are easier to value than others, and although uncertainty with value estimates is different for different assets, the core principles remain the same.
Happy Investing and Be Extraordinary!
Myles
It is true that some assets are easier to value than others, and although uncertainty with value estimates is different for different assets, the core principles remain the same.
Happy Investing and Be Extraordinary!
Myles
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