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Stock Investment-Margin of Safety for Stocks
1 Concept
Generally speaking, it is the reasonable price range of a stock
2 Examples
Real estate is a relatively lucrative industry. After analyzing the intrinsic value of the company’s stocks, then reducing the valuation by 30%-40% as the purchase price, so that the investment can get a 50% return
Of course, this is mainly to reduce the risks of valuation errors and poor luck! Of course Graham often buys at 50% of the valuation! This is very safe and can get 100% benefits when the value returns
3 Evaluation
Of course, the margin of safety is a vague concept. Some are evaluated by the price-earnings ratio, and some are evaluated by the return on equity. However, the standards given by each industry are different for the price-earnings ratio. The return on equity is maintained at a high level. If the performance suddenly fails to meet the standard in a certain year , Then his stock price will be greatly discounted.