Valuation

“We believe that if a market is so overvalued that you can only find a few stocks to buy, you are probably better off not buying anything.”

“It is not the low multiple by itself that provides unusual opportunity nor the high evaluations that carry excessive risk. It is, rather, that the level of investment anticipations is low on one side and high on the other.”

“Current earnings, future prospects, management, marketability are all factors more or less independent of assets which contribute their share to the intrinsic value.”

“Let us define the speculator as one who seeks to profit from market movements, without primary regard to intrinsic values; the “prudent stock investor” as one who (a) buys only at prices amply supported by underlying value, and (b) who determinedly reduces his stock holdings when the market enters the speculative phase of a sustained advance.”

“The value approach has been founded on the premise that in many — but by no means in all — cases a dependable range of valuation can be established for a common stock by analytical techniques; that often this range differs substantially from the current price; and that such differences offer rewarding opportunities for investment operations.”

“Let us define the speculator as one who seeks to profit from market movements, without primary regard to intrinsic value; the prudent stock investor as one who (a) buys only at prices amply supported by underlying value, and (b) who determinedly reduces his stock holdings when the market enters the speculative phase of a sustained advance.”

“Rates of return on stocks are a function of three things: beginning dividend yields, growth of earnings, and changes in valuation.”

“The most important question in investing is what is discounted, or put slightly differently, what are the expectations embedded in the valuation?”

“Most companies that sport lofty valuations fail to generate results that justify them.”

“Bull markets typically begin when the following four conditions are present: the economy is bottoming, profits are bottoming, the Fed is stimulating, and valuations are low.”

“Almost every value trap is the result of people extrapolating past returns on capital and past valuations onto a different situation today.”

“If you have a valuation discipline, then you know that stock prices change more rapidly than business value. You also know that rising stock prices mean lower future rates of return and falling stock prices mean higher rates of return.”

“Valuation is determined by the relation between a stock price and the present value of the free cash the business will generate over one’s forecast time horizon. The problem comes with assessing the future free cash flow. It is a highly subjective and uncertain exercise.”

“In general, stocks are not undervalued because they go up over some short time frame. But it’s hard to make a case that they’re not undervalued if they go up year after year over long periods of time — especially when they’ve provided excess rates of return over the market.”

“I didn’t get rich by buying stocks at a high price-earnings multiple in the midst of crazy speculative booms, and I’m not going to change.”

“People say the market is overvalued, but if you are only looking at certain names, you will always find times when those names are undervalued. That’s what we’re waiting for.”

“Market timing is hard — but ignoring valuations is harder.”

“I know that stocks represent fractional ownership in businesses and that, over time, the stock market will reflect their true intrinsic values. And crises bring worries and fears that make many investors forget that simple fact.”

“I believe denying clients the ability to be hyper-traders is doing them a favor. Most people are not adept enough to take advantage of short-term mis-valuations, and I put myself in that category.”

“Valuation tells you what to buy; psychology tells you when to buy it.”

“Valuation is a terrible timing tool and a wonderful return predictor.”

“You can’t be a good value investor without being an independent thinker – you’re seeing valuations that the market is not appreciating. But it’s critical that you understand why the market isn’t seeing the value you do.”

“In point of fact, all sorts of considerations enter into the market valuation which are in no way relevant to the prospective yield.”

“Great companies grow into their valuations.”

“Valuation matters — but survival matters more.”

“In investing, nothing beats the discovery of an undervalued stock, no matter what the nature of its business or the past trend of its earnings.”

“The P/E ratio is only a reflection of what most investors expect to happen at a point in time, and that is neither here nor there in terms of what actually will happen.”

“History shows us, over and over, that bull markets can go well beyond rational valuation levels as long as the outlook for future earnings is positive.”

“It takes a great deal of nerve to cling to a short position in a stock in the face of an advancing market even though the stock may clearly be overvalued.”

“Rather than focus on numerical indexes in investment decisions, the investor should focus on unique characteristics that protect the investment from competition. Thus bar to access is a critical element in the evaluation.”

“In my opinion, the market tells you when to buy things. And when things are really cheap, on a Graham and Dodd valuation basis, you should like them more. And when they’re really expensive, you should like them less.”

“The laws of probabilities tell us that almost anyone can achieve phenomenal success over any given measurement period. It is the task of those evaluating a money manager to ascertain how much of past success is due to luck and how much to skill.”

“It would be silly to expect every bear market to turn into the Great Depression. It would be equally wrong to expect that a fall from overvalued, to more fairly valued, couldn’t badly overshoot on the downside.”

“Investors must never mistake an investment that is down in price for one that is bargain-priced; undervaluation is determined only by a security’s price compared to its underlying value.”

“We consider for each of our investments not only whether a security is undervalued but why it is undervalued. If the reason is that there are uninformed or emotional sellers, we become more comfortable.”

“The main underlying principle of value investing is that you should invest in undervalued securities because they alone offer a margin of safety.”

“Just because we think a stock is undervalued doesn’t mean we’re right. We may be wrong in our judgment.”

“I make no attempt to forecast the general market — my efforts are devoted to finding undervalued securities.”

“The evaluation of securities and businesses for investment purposes has always involved a mixture of qualitative and quantitative factors.”

“I have always found it easier to evaluate weights dictated by fundamentals than votes dictated by psychology.”

“Market prices for stocks fluctuate at great amplitudes around intrinsic value but, over the long term, intrinsic value is virtually always reflected at some point in market price.”

“The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’re got a very good business. And if you have to have a prayer session before raising the price by a tenth of a cent, then you’ve got a terrible business.”