#1
Value Reversion
"In the short run, the market is a voting machine but in the long run, it is a weighing machine."
Short-term prices are driven by sentiment, but long-term prices always converge to business value.
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Warren Buffett⚖️ Value Assessment
Warren Buffett's Value Assessment Rules
Warren Edward Buffett (born August 30, 1930) is an American businessman, investor, and philanthropist. He is the chairman and CEO of Berkshire Hathaway, a multinational conglomerate holding company. Known as the "Oracle of Omaha," Buffett is one of the most successful investors of all time with a net worth exceeding $100 billion. Under his leadership, Berkshire Hathaway's stock price has...
6 principles·Value Assessment
6 Key Value Assessment Principles
#2
Franchise Value
"An economic franchise arises from a product or service that: (1) is needed or desired; (2) is thought by its customers to have no close substitute; and (3) is not subject to price regulation."
A true economic franchise has pricing power, customer loyalty, and no close substitutes.
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Wonderful Company at Fair Price
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
Overpaying for a great business beats getting a bargain on a mediocre one.
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Owner Earnings
"Owner earnings are the relevant item for valuation purposes — not reported earnings."
Owner earnings — not accounting earnings — reveal a business's true economic reality.
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Intrinsic Value
"Intrinsic value is the discounted value of the cash that can be taken out of a business during its remaining life."
Intrinsic value is the only rational benchmark for investment decisions.
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Price vs. Value
"Price is what you pay, value is what you get. They are not the same thing."
The core lesson of value investing: separate market price from intrinsic business value.
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What are Warren Buffett's key value assessment principles?
Warren Buffett has 6 key principles on value assessment. The most important one is "Value Reversion" — In the short run, the market is a voting machine but in the long run, it is a weighing machine.
How does Warren Buffett apply value assessment in practice?
Warren Buffett applies value assessment through several key principles including "Value Reversion" and "Franchise Value". These principles guide practical investment decisions and have been tested across decades of market cycles.
What makes Warren Buffett's approach to value assessment unique?
Warren Buffett's approach to value assessment is distinguished by a focus on long-term thinking and fundamental analysis. With 6 specific principles in this area, Warren Buffett provides a comprehensive framework that investors at any level can study and apply to improve their decision-making.
