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Investment approach of Warren Buffet

Investment approach of Warren Buffet:

According to Benjamin Graham, the father of securities analysis, value investment was the only form of investment which means that purchasing a stock at less than its intrinsic value. Warren Buffet followed that rule but of course with some modifications over time. Finding the intrinsic value of a stock is a difficult task but usually can be found out by using a company’s fundamentals. Value investing therefore means investing in a stock which holds benefits in the long run and is currently undervalued and is not a desired stock by most of the buyers. Buffet does not believe in the efficient market hypothesis and discards the demand and supply rule in security markets. Instead, he looks at a company through a long term perspective and wishes to have a stake of ownership rather than capital gains. Buffet just likes to ensure if the company as a whole is able to generate enough profits. He looks at the return on equity, debt/equity ratio, increase in profit margins, companies that are listed on the exchange for at least ten years, if the company relies on one particular commodity for its business and if the intrinsic value is 25% higher than the market value.

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