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Value Investing

investment strategy
Definition
An investment approach that seeks to buy securities trading below their intrinsic value, with a margin of safety.

Explanation

Value investing was founded by Benjamin Graham and David Dodd at Columbia University in the 1930s. Warren Buffett, Graham's most famous student, evolved the approach from buying 'cigar butts' (cheap but mediocre businesses) to buying 'wonderful companies at fair prices.' Core principles: (1) stocks are fractional ownership of businesses, not lottery tickets; (2) market prices fluctuate around intrinsic value; (3) buying below intrinsic value provides a margin of safety; (4) patience is required for the market to recognize value. The value factor has underperformed growth for much of 2015-2024, challenging but not invalidating the approach.

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