The Business of Value Investing.pdf

172 The Business of Value Investing

of reduced valuations for the vessels. Simply assigning the stated

book value of $ 49 a share was not satisfactory in order to assign a

conservative book value for the company. In the case of Johnson

& Johnson, over 100 years of profi tability during various economic

conditions was in itself a satisfactory condition that the company

was still a suitable investment.^7

Key Takeaways

• Investment in stocks should be made with a long - term orientation. In
  the short run, market prices are affected by the votes of the market partici-
  pants. In the long run, stock prices will catch up with the fundamentals of
  the business.


• Along with reduced trading mistakes, a patient investment approach
  minimizes transaction costs.


• The level of cash in a portfolio should be affected by the availability of
  bargain investments.


• Some of the market ’ s greatest benefi ts — liquidity and establishment of
  prices — can also be a source of great loss to investors who fall prey to the
  unnecessary noise they often create.


• General undervalued investments arise from two situations: market
  prices below private sale value or buying growth businesses at reasonable
  prices. Both situations allow for an investment to be made at prices suffi -
  ciently below intrinsic value.

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