Understanding Value Investing: The English Equivalent and Its Principles

Value investing, a strategy that has stood the test of time in the world of finance, revolves around the concept of identifying and investing in securities that are trading beLow their intrinsic value. This investment philosophy, which has its roots in the teachings of legendary investors like Benjamin Graham and Warren Buffett, is often referred to as "value investing" in English. In this article, we will delve into the concept of value investing, its English equivalent, and the core principles that guide this investment strategy.

The English Equivalent: Value Investing

The English equivalent of "价值投资" is "value investing." This term encapsulates the essence of the strategy, which is to seek out investments that offer a higher potential return relative to their current market price. The underlying belief is that the market is inefficient and often undervalues certain assets, providing investors with an opportunity to buy low and sell high.

Principles of Value Investing

1、Intrinsic Value: The cornerstone of value investing is the concept of intrinsic value. This refers to the true worth of a security, which is often determined by fundamental analysis. Investors who practice value investing seek to buy stocks, bonds, or other securities at a price below their intrinsic value, anticipating that the market will eventually recognize their true worth.

2、Ben Graham's Net Current Asset Value (NCAV): Benjamin Graham, often hailed as the father of value investing, introduced the concept of Net Current Asset Value (NCAV). This method involves calculating the sum of a company's current assets minus its current liabilities. Graham believed that if a stock's market price was below its NCAV, it represented a good investment opportunity.

3、Discount to Book Value: Another approach to value investing is to compare a company's market capitalization to its book value. Book value is the net asset value of a company, calculated by subtracting its liabilities from its assets. If a company is trading at a significant discount to its book value, it may be undervalued.

4、Quality Companies: Value investors often focus on the quality of a company rather than just its price. They look for businesses with strong fundamentals, such as a solid balance sheet, consistent earnings, and a strong competitive advantage. These companies are more likely to sustain their intrinsic value over the long term.

5、Long-Term Perspective: Value investing is not a short-term strategy. Investors who follow this philosophy are typically looking for long-term gains. They are willing to hold onto their investments for years, even decades, if necessary, to realize the true potential of the investment.

6、Discipline and Patience: One of the key traits of a successful value investor is discipline. This means sticking to the principles of value investing and not getting swayed by market emotions. Patience is also crucial, as value investments may take time to appreciate in value.

Case Studies

Several notable investors have successfully implemented value investing strategies. Here are a few examples:

Warren Buffett: Perhaps the most famous value investor of all time, Buffett has built Berkshire Hathaway into one of the world's largest and most successful companies by investing in undervalued stocks and businesses.

John Templeton: Templeton was known for his global investing approach and for identifying undervalued assets around the world. He believed in buying low and holding for the long term.

Mohnish Pabrai: A contemporary value investor, Pabrai has made a name for himself by following the principles of Benjamin Graham and seeking out deeply undervalued companies.

Conclusion

Value investing, or "value investing" in English, is a time-tested investment strategy that focuses on identifying and investing in securities that are trading below their intrinsic value. By adhering to the principles of intrinsic value, quality companies, and long-term perspective, value investors aim to achieve superior returns over time. While the path to success in value investing is not without its challenges, the discipline and patience required can lead to significant wealth accumulation for those who stick to the strategy.