

While everyone sells, smart investors are buying
market, investors crave stability, and it’s understandable. Nobody wants to lose sleep over their equity portfolios. But there is a proven way to invest in turbulent times and still aim for long-term profits: value investing.At Equitymaster, we believe this strategy is the key to finding high-quality stocks today.
Here’s how it works.Value investing seeks profit by identifying undervalued stocks. The goal is simple: determine a company’s intrinsic value, buy it at a discount, and sell when the stock exceeds that value.Pioneered by Benjamin Graham, value investing relies on fundamental analysis to estimate intrinsic value. Investors then compare it to the stock price: they buy when the market undervalues the stock and sell when it trades at a premium.The logic is straightforward: short-term market prices fluctuate with sentiment, but over time they converge with intrinsic value.
This deviation creates opportunities for profit.Estimating intrinsic value involves judgment, so errors are possible. The margin of safety cushions against these mistakes.For example, if your analysis suggests an intrinsic value of ₹100, applying a 20% margin of safety would reduce your target price to ₹80. Even if the intrinsic value turns out to be ₹90, you still buy below that value—protecting your downside.Value investing works because the market takes time to recognize a stock’s intrinsic value.
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