📖David Swensen
Buy Below Intrinsic Value
Buy only at prices well below intrinsic value.
The cardinal rule of investing: buy only when the price is significantly below your conservative estimate of intrinsic value. This builds in protection against error.
🏠 Everyday Analogy
📖 Core Interpretation
In Buy Below Intrinsic Value, David Swensen focuses on the gap between price and value. Returns come from paying less than what a business is worth, not from guessing short-term market moves.
💎 Key Insight：Buying below value builds in protection against error.
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❓ Why It Matters
Ignoring valuation turns even good companies into poor investments. Overpaying compresses future returns and leaves little margin when assumptions are wrong.
🎯 How to Practice
Estimate intrinsic value with conservative assumptions, set clear buy ranges, and act only when price offers a meaningful discount with acceptable downside.
⚠️ Common Pitfalls
Confusing a low price with true cheapness
Using one metric without business context
Overly optimistic assumptions that erase margin of safety
📚 Case Studies
1
Tech Bubble Overexposure (1999)
A U.S. endowment, favoring familiar domestic equities, overweighted large‑cap tech stocks instead of diversifying into real assets and foreign equities before the dot‑com peak.
✨ Outcome：Portfolio fell sharply in 2000–2002, underperforming diversified peers that followed Swensen-style multi‑asset allocations.
2
Home-Country Equity Concentration (2008)
A pension fund, biased toward domestic equities, maintained heavy U.S. stock exposure and minimal allocations to Treasuries, TIPS, and alternatives going into the global financial crisis.
✨ Outcome：Suffered deep drawdowns and a slow recovery, while more diversified, equity-skeptic portfolios preserved capital and rebounded faster.
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