So, if Value has to be found, what does price is there to say? For stocks price will not tell you that much about the company, the business, the going-on concern value. (That is the value we try to calculate or find for something that produces an inflow (and outflow) of cash. The “numbers” (accounting numbers) of the business will tell you that story you must be eager to learn and know about. That’s why Warren doesn’t look at the price before reading a 10Q or a 10K or a financial report in general of a company. He doesn’t want to be influenced by the price of the stock. In that moment it doesn’t matter. And it’s a critical concept to understand. You look at the price AFTER you have come to a conclusion about a Value, or more than a Value, of this particular company you want to buy. You want this conclusion based on a sound reasoning. You want this conclusion based on supportable evidence and investigation throughout the company, if possible. (But we’ll talk in the future about reputation, management, strenght of the brand and so on..) Let’s focus now about our “Value”. At the end of the day we are looking for just one Value. But there could be more than one..
More than a Value? Exactly right. It can exist more than a value, and professional brokers that come from the Real Estate world they know it very well. For a seasoned appraiser is easy to say that an “investment value” is different from a “market value” of a property. As an investor you don’t want to pay an investment property a price that is very good for the seller. You want to pay a price that is good for you buyer, and that you expect will increase with its value in the future. And here we are about the three fundamental key questions you have to ask yourself before every investment decisions you’re going to make. Those three key questions are..
(to be continued)