Value Investing General Principles

Abstract

This paper profiles what I believe are core value investing general principles. In my work as a corporate financial and strategic advisor, I have observed a need for such an exposition because core value investing theory is not well understood by many corporate executives. Two anecdotal examples will illustrate this: (1) While speaking with a C-level executive about a potential acquisition he was contemplating, I mentioned the practical insights that a value investing-based analysis could provide. He replied, "We have a lot people running dividend discount models so we're good there." He looked at me funny when I replied that such models were not at all what I meant by a value investing-based analysis, and (2) While speaking with another executive about an acquisition I again broached the topic of value investing-based analysis to which he replied, "I know all about that and already 'buy low and sell high.'" I observed that, given his acquisition history, he was not "buying low" and, further, that there was a great deal more to value investing than that. While this paper is introductory in nature, more experienced readers may be interested in how I interpret and profile the general value investing principles they are familiar with.

Keywords: Value Investing, General Principles, Corporate Finance, Corporate Strategy

JEL Classification: G30, G31, G34, L10