3 Easy and Fast Tips to Pick a Stock Based on Value Investing Method
By Tony Dillard
In my opinion, choosing to buy a stock based on the strategy called "value investing" is one of the most effective methods to add value to your portfolio.
Value investing is not a fad. Warren Buffet known as one of the greatest and successful investors of our time (and of all time) has proven once and again (and again) that value investing works, because he applied the principles of value investing to his own company, Berkshire Hathaway. The result? The price went from $12 in 1967 to an astronomical $125,200 (yes! price per share!)
At that price, market cap for this company is $206 billions!
When picking a stock to buy, Buffet generally uses the value investing principles. His stock buying decisions made him (and those people who followed him, too) very wealthy.
The value investing method is all about determining the real worth of a company's underlying assets, and determining the corresponding price per share. Armed with that data, the value investor knows that, even thought the stock value might fall for a few days, in the long run the price will be higher than when he bought it.
Here are 3 fast tips on value investing, when considering a stock to buy:
1. Stock price should be no more than 2/3 of its intrinsic value.
2. Share price should be no more than its book value.
3. The company earnings growth should be positive for at least 3 years in a row.
Of course, there's more to it, but these 3 tips should guide you and motivate to learn more on the subject. Just browse on Amazon and try to pick a good book on value investing strategies... that small investing plus your time and commitment to learn, can make you a successful value investor.