By www.ProfitableInvestingTips.com Value Investing for Long Term Profits In the depths of the Great Depression Benjamin Green introduced investors to the concept of value based stock investing. According to Mr. Green investors could use value based stock investing for long term profits if they based their investment choices on stock fundamentals. Value based investing works on two principles. There is always a degree of market inefficiency due to lack of information, poor information, or market psychology. And the market eventually discovers the true value of any given stock as fundamental analysis comes to the fore. Investors who study the fundamentals to discover the intrinsic value of a stock and its margin of safety will tend to profit in the long term. But, what the tools that one must use in value investing for long term profits? How Does the Stock Compare to Others? A quick and useful comparison for value investing for long term profits is to look at the price to earnings ratio (P/E ratio) of a given stock. The P/E ratio is a good measure of how the market views the stock. Compare the P/E ratio of stock in which you are interested to the P/E ratio of other stocks in its market sector. When a company is growing rapidly, investors will often pay more for the stock than if it is not. Thus a fast growing stock will often have a high P/E ratio. This is a warning for long term investors as much of the anticipated price increase of that stock has already been priced into the stock by the market. In value investing for long term profits it is often wise to look for stocks with low price to earnings ratios. Always compare stock earnings to stock price before you invest. What Sort of Profits Does the Future Hold? In using value investing for long term profits, investors look for the intrinsic value of a stock. What is intrinsic stock value? The intrinsic value of a stock is its future income stream discounted to present day value. For example, you expect the stock to be worth twice as much in ten years. You expect its dividend to double. And you expect interest rates to rise and make the US dollar less valuable. Then compare the value of today’s stock to AAA bonds or US Treasuries at today’s interest rates. What can you expect to earn from a solid interest bearing investment? Run that investment back to today and compare it with your stock price and anticipated earnings to see the intrinsic value of your stock. A stock that is undervalued in this context is commonly a good long term investment. Margin of Safety Finding the margin of safety of a stock is a useful means of assuring against loss. Value investing for long term profits requires a little safety as well as a little promise. Companies that have unencumbered assets such as bank deposits, property, patents, and the like are more likely to survive a recession intact than companies with excessive debt.

1. VALUE INVESTING FOR LONG
TERM PROFITS
By www.ProfitableInvestingTips.com

2. By
www.ProfitableInvestingTips.com
In the depths of the Great
Depression Benjamin Green
introduced investors to the
concept of value based stock
investing.
By

3. By
www.ProfitableInvestingTips.com
According to Mr. Green
investors could use value
based stock investing for long
term profits if they based their
investment choices on stock
fundamentals.
By

4. By
www.ProfitableInvestingTips.com
Value based investing works
on two principles.
By

5. By
www.ProfitableInvestingTips.com
There is always a degree of
market inefficiency due to lack
of information, poor
information, or market
psychology.
By

6. By
www.ProfitableInvestingTips.com
And the market eventually
discovers the true value of any
given stock as fundamental
analysis comes to the fore.
By

7. By
www.ProfitableInvestingTips.com
Investors who study the
fundamentals to discover the
intrinsic value of a stock and
its margin of safety will tend to
profit in the long term.
By

8. By
www.ProfitableInvestingTips.com
But, what the tools that one
must use in value investing for
long term profits?
By

9. How Does the Stock Compare
to Others?
By www.ProfitableInvestingTips.com

10. By
www.ProfitableInvestingTips.com
A quick and useful comparison
for value investing for long
term profits is to look at the
price to earnings ratio (P/E
ratio) of a given stock.
By

11. By
www.ProfitableInvestingTips.com
The P/E ratio is a good
measure of how the market
views the stock.
By

12. By
www.ProfitableInvestingTips.com
Compare the P/E ratio of stock
in which you are interested to
the P/E ratio of other stocks in
its market sector.
By

13. By
www.ProfitableInvestingTips.com
When a company is growing
rapidly, investors will often pay
more for the stock than if it is
not.
By

14. By
www.ProfitableInvestingTips.com
Thus a fast growing stock will
often have a high P/E ratio.
By

15. By
www.ProfitableInvestingTips.com
This is a warning for long term
investors as much of the
anticipated price increase of
that stock has already been
priced into the stock by the
market.
By

16. By
www.ProfitableInvestingTips.com
In value investing for long term
profits it is often wise to look
for stocks with low price to
earnings ratios.
By

17. By
www.ProfitableInvestingTips.com
Always compare stock
earnings to stock price before
you invest.
By

18. What Sort of Profits Does
the Future Hold?
By www.ProfitableInvestingTips.com

19. By
www.ProfitableInvestingTips.com
In using value investing for
long term profits, investors look
for the intrinsic value of a
stock. What is intrinsic stock
value?
By

20. By
www.ProfitableInvestingTips.com
The intrinsic value of a stock is
its future income stream
discounted to present day
value.
By

21. By
www.ProfitableInvestingTips.com
For example, you expect the
stock to be worth twice as
much in ten years.
By

22. By
www.ProfitableInvestingTips.com
You expect its dividend to
double.
By

23. By
www.ProfitableInvestingTips.com
And you expect interest rates
to rise and make the US dollar
less valuable.
By

24. By
www.ProfitableInvestingTips.com
Then compare the value of
today’s stock to AAA bonds or
US Treasuries at today’s
interest rates.
By

25. By
www.ProfitableInvestingTips.com
What can you expect to earn
from a solid interest bearing
investment?
By

26. By
www.ProfitableInvestingTips.com
Run that investment back to
today and compare it with your
stock price and anticipated
earnings to see the intrinsic
value of your stock.
By

27. By
www.ProfitableInvestingTips.com
A stock that is undervalued in
this context is commonly a
good long term investment.
By

28. Margin of Safety
By www.ProfitableInvestingTips.com

29. By
www.ProfitableInvestingTips.com
Finding the margin of safety of
a stock is a useful means of
assuring against loss.
By

30. By
www.ProfitableInvestingTips.com
Value investing for long term
profits requires a little safety as
well as a little promise.
By

31. By
www.ProfitableInvestingTips.com
Companies that have
unencumbered assets such as
bank deposits, property,
patents, and the like are more
likely to survive a recession
intact than companies with
excessive debt.
By

32. By
www.ProfitableInvestingTips.com
Look for what keeps a
company in the game when
times are tough and that factor
what you need to find in value
investing for long term profits.
By

33. By
www.ProfitableInvestingTips.com
For more insights and useful
information about investments
and investing, visit
www.ProfitableInvestingTips.co
m.
By