Tuesday, 7 July 2009

Value Investing for Beginners Warren Buffett Style

Ever heard of value investing? How about Warren Buffett? He's only the single most successful person in the stocks game. When I was first learning how to buy shares I stumbled on this technique. Warren Buffett followed a technique known as value investing first coined by Benjamin Graham way back in 1934 with his book on Security Analysis but its probably his book titled The Intelligent Investor published in 1949 for which he is most famous. In this he detailed the approach of value investing. He would study a company in depth and look for shares where the price was lower than what he believed the company was worth. He determined this through different types of analysis and this is the basis of value investing.

So how can you determine the value of a company? The first step is to look for companies that trade at discounts to book value. Book value is the value of a company based on its balance sheet account balance. To determine this you'd have to get the companies annual report and get the total of the assets minus any liabilities. This is a good start now on to the next stage. Then also from the annual report check to see the dividend paid out to its share holders and ensure its high. Finally, look for shares which have a low price to earning ration. Many sites online now let you add this column in when searching for shares. Yahoo finance certainly does if you decide to buy stocks online.

Hopefully this guide is useful and provides you with a good introduction on value investing!

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