The Business of Value Investing.pdf

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4


CHAPTER


Establish a Sound


Investment Philosophy


THE FIRST ELEMENT


Value investing is actually a comprehensive investment philosophy
that emphasizes the need to perform in - depth fundamental analysis,
pursue long - term investment results, limit risk, and resist crowd
psychology.
— Seth Klarman

The vast majority of information about any particular investment


is merely noise. Successful businesses usually are identifi ed by a
handful of meaningful variables or data points; everything else is
secondary to the success or failure of the business. Warren Buffett
has often remarked that he never uses a spreadsheet or calculator
when making investment decisions. It is also true that Buffett has
a gifted mind for numbers and remembering data. The point is
not against the use of spreadsheets (or a calculator). Spreadsheets
and calculators are tools that can add value to any analysis. The
point is that elaborate spreadsheets with hundreds of formulas and
ratios have so many built - in assumptions that most likely offer no

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