We seek to invest in shares of companies that trade at a significant discount to our assessment of the intrinsic value of the business with an adequate margin of safety. Since shares represent a fractional stake in a business, we try to think like business owners when evaluating potential investments and assess each opportunity as if we were planning to buy the entire company. By looking at fundamental data going as far back as possible, we also try to judge the normal range of a company’s profitability and valuation over many market cycles. The chart below is an example of one of the tools our analysts use to assess the long-term fundamentals of a company. It overlays the share price of the company with key fundamental metrics. Although it is just a starting point, the chart helps analysts to quickly understand the company’s long-term fundamentals and their relationship with its share price, thereby enabling them to focus their research on the most promising ideas.
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