This is effectively a way of saying, all right, if i buy this super cheap, if i get a ten dollar bill for five dollars, there's very little downside. It's like i'm getting a free lottery ticket. My projection of future earnings in cash floa is nowhere near the industry ceiling. I mean, really? You're riding too slow. You got to write faster.
In Rule #1 investing, we call “buying on sale” purchasing stocks with a Margin of Safety. All you have to do to get a big MOS is know the value of the business you are buying—as a business—and then wait to buy it until the market drops much lower than the value. Today, Phil and Danielle dive deeper into Margin of Safety valuations, and explain why understanding how to value a company is critical to stockpiling.
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