How value investing works?
Value investing is buying an asset at significant discount to its intrinsic value. Margin of safety is cornerstone of value investing style. Price and value are two sides of the same coin. Understanding the difference between price and value is the core principle of value investing.
Let’s understand with a simple example: Suppose Mr. Madhav want to buy a smartphone worth Rs.50000. During festive season on e-commerce platform, same handset is offered at discount at Rs.42000. So it is profitable for him to buy the mobile during the festive season as once the season ends, the smartphone price comes back to its original price.
Same condition applies to the value investing. Under value investing approach one tries to identify stocks which are mispriced by the market.
"Investing is buying a fractional interest in a business & buying debt claims on a business" - Seth Klarman
The Brighter Mind Approach
We, at Brighter Mind, follow the value investment principles to design our investment strategies and believe in portfolio construction based on time-tested approach. We look at stock prices as part-ownership in the business rather than a piece of paper traded on exchanges on daily basis.
Brighter Mind strongly focuses on safety of capital first and believes in return of capital over return on capital. Brighter Mind strongly believes in sustainable wealth creation over longer term with business ownership mind-set and ignoring day-to day market noises.