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Margin Of Safety (financial)
A margin of safety (or safety margin) is the difference between the intrinsic value of a stock and its market price. Another definition: In break-even analysis, from the discipline of accounting, margin of safety is how much output or sales level can fall before a business reaches its break-even point. Break-even point is a no-profit, no-loss scenario. History Benjamin Graham and David Dodd, founders of value investing, coined the term margin of safety in their seminal 1934 book, ''Security Analysis''. The term is also described in Graham's ''The Intelligent Investor''. Graham said that "the margin of safety is always dependent on the price paid". Application to investing Using margin of safety, one should buy a stock when it is worth more than its price in the market. This is the central thesis of value investing philosophy which espouses preservation of capital as its first rule of investing. Benjamin Graham suggested to look at unpopular or neglected companies with low P/E ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Intrinsic Value (finance)
In finance, the intrinsic value of an asset usually refers to a value calculated on simplified assumptions. For example, the intrinsic value of an option is based on the current market value of the underlying instrument, but ignores the possibility of future fluctuations and the time value of money. Options An option is said to have intrinsic value if the option is in-the-money. When out-of-the-money, its intrinsic value is ''zero''. For an option, the intrinsic value is the same as the "immediate value" or the "current value" of the contract, which is the profit that could be gained by exercising the option immediately. The intrinsic value for an in-the-money option is calculated as the absolute value of the difference between the current price (''S'') of the underlying and the strike price (''K'') of the option. :IV_= 0 :IV_=\left \vert S-K \right \vert = \left \vert K-S \right \vert For example, if the strike price for a call option is USD 1.00 and the price of the und ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Price
A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the commercial exchange, the payment for this product will likely be called its "price". However, if the product is "service", there will be other possible names for this product's name. For example, the graph on the bottom will show some situations A good's price is influenced by production costs, supply of the desired item, and demand for the product. A price may be determined by a monopolist or may be imposed on the firm by market conditions. Price can be quoted to currency, quantities of goods or vouchers. * In modern economies, prices are generally expressed in units of some form of currency. (More specifically, for raw materials they are expressed as currency per unit weight, e.g. euros per kilogram or Rands per KG.) * Although prices ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Break-even (economics)
The break-even point (BEP) in economics, business—and specifically cost accounting—is the point at which total cost and total revenue are equal, i.e. "even". There is no net loss or gain, and one has "broken even", though opportunity costs have been paid and capital has received the risk-adjusted, expected return. In short, all costs that must be paid are paid, and there is neither profit nor loss. Overview The break-even point (BEP) or break-even level represents the sales amount—in either unit (quantity) or revenue (sales) terms—that is required to cover total costs, consisting of both fixed and variable costs to the company. Total profit at the break-even point is zero. It is only possible for a firm to pass the break-even point if the dollar value of sales is higher than the variable cost per unit. This means that the selling price of the goods must be higher than what the company paid for the good or its components for them to cover the initial price they paid (var ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Accounting
Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "language of business", measures the results of an organization's economic activities and conveys this information to a variety of stakeholders, including investors, creditors, management, and regulators. Practitioners of accounting are known as accountants. The terms "accounting" and "financial reporting" are often used as synonyms. Accounting can be divided into several fields including financial accounting, management accounting, tax accounting and cost accounting. Financial accounting focuses on the reporting of an organization's financial information, including the preparation of financial statements, to the external users of the information, such as investors, regulators and suppliers; and management accounting focuses on the measurement ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Output (economics)
Output in economics is the "quantity of goods or Service (economics), services Production (economics), produced in a given time period, by a firm, industry, or country", whether consumed or used for further production. The concept of national output is essential in the field of macroeconomics. It is national output that makes a country rich, not large amounts of money. Definition Output is the result of an economic process that has used input (economics), inputs to produce a product or service that is available for sale or use somewhere else. ''Net output'', sometimes called ''netput'' is a quantity, in the context of production, that is positive if the quantity is output by the production process and negative if it is an input to the production process. Microeconomics Output condition The profit-maximizing output condition for producers equates the relative marginal cost of any two goods to the relative selling price of those goods; i.e. \frac = \frac One may als ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Break-even
Break-even (or break even), often abbreviated as B/E in finance, (sometimes called point of equilibrium) is the point of balance making neither a profit nor a loss. Any number below the break-even point constitutes a loss while any number above it shows a profit. The term originates in finance but the concept has been applied in other fields. In economics In economics and business, specifically cost accounting, the break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or loss has not been made, although opportunity costs have been "paid" and capital has received the risk-adjusted, expected return. In other words, it is the point at which the total revenue of a business exceeds its total costs, and the business begins to create wealth instead of consuming it. It is shown graphically as the point where the total revenue and total cost curves meet. In the linear case the break-even poin ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Benjamin Graham
Benjamin Graham (; né Grossbaum; May 9, 1894 – September 21, 1976) was a British-born American economist, professor and investor. He is widely known as the "father of value investing", and wrote two of the founding texts in neoclassical investing: ''Security Analysis'' (1934) with David Dodd, and ''The Intelligent Investor'' (1949). His investment philosophy stressed investor psychology, minimal debt, buy-and-hold investing, fundamental analysis, concentrated diversification, buying within the margin of safety, activist investing, and contrarian mindsets. After graduating from Columbia University at age 20, he started his career on Wall Street, eventually founding the Graham–Newman Partnership. After employing his former student Warren Buffett, he took up teaching positions at his '' alma mater,'' and later at UCLA Anderson School of Management at the University of California, Los Angeles. His work in managerial economics and investing has led to a modern wave of value ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
David Dodd
David LeFevre Dodd (August 23, 1895 – September 18, 1988) was an American educator, financial analyst, author, economist, and investor. In his student years, Dodd was a ' and colleague of Benjamin Graham at Columbia Business School. The Wall Street Crash of 1929 (Black Tuesday) almost wiped out Graham, who had started teaching the year before at his alma mater, Columbia. The crash inspired Graham to search for a more conservative, safer way to invest. Graham agreed to teach with the stipulation that someone take notes. Dodd, then a young instructor at Columbia, volunteered. Those transcriptions served as the basis for a 1934 book ''Security Analysis'', which galvanized the concept of value investing. It is the longest running investment text ever published. Early life and education In 1916, Dodd graduated from High Street School, a high school in Martinsburg, West Virginia, where his father was the principal. In 1920, he completed his Bachelor of Science, at University of Pe ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Value Investing
Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis. The various forms of value investing derive from the investment philosophy first taught by Benjamin Graham and David Dodd at Columbia Business School in 1928, and subsequently developed in their 1934 text ''Security Analysis''. The early value opportunities identified by Graham and Dodd included stock in public companies trading at discounts to book value or tangible book value, those with high dividend yields, and those having low price-to-earning multiples, or low price-to-book ratios. High-profile proponents of value investing, including Berkshire Hathaway chairman Warren Buffett, have argued that the essence of value investing is buying stocks at less than their intrinsic value. The discount of the market price to the intrinsic value is what Benjamin Graham called the " margin of safety". For the last 25 years, under the influence of ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Security Analysis (book)
''Security Analysis'' is a book written by professors Benjamin Graham and David Dodd of Columbia Business School, which laid the intellectual foundation for what would later be called value investing. The first edition was published in 1934, shortly after the Wall Street crash and start of the Great Depression. Among other terms, Graham and Dodd coined the term margin of safety in ''Security Analysis''. History ''Security Analysis'' was published by McGraw-Hill, and written by David Dodd and Benjamin Graham in the early 1930s, when both authors taught at Columbia University's business school. Writes ''The New York Times'', "it was intended as a common-sense guide for investors but turned out to be a thick textbook that went through five editions and sold more than 250,000 copies y 1988"Obituary [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
The Intelligent Investor
''The Intelligent Investor'' by Benjamin Graham, first published in 1949, is a widely acclaimed book on value investing. The book provides strategies on how to successfully use value investing in the stock market. Historically, the book has been one of the most popular books on investing and Graham’s legacy remains. Background and history ''The Intelligent Investor'' is based on value investing, an investment approach Graham began teaching at Columbia Business School in 1928 and subsequently refined with David Dodd. This sentiment was echoed by other Graham disciples such as Irving Kahn and Walter Schloss. Warren Buffett read the book at age 20 and began using the value investing taught by Graham to build his own investment portfolio. ''The Intelligent Investor'' also marks a significant deviation to stock selection from Graham's earlier works, such as ''Security Analysis''. Which is, instead of extensive analysis on individual company, just apply simple earning criteria and ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Capital Preservation
Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the durable produced goods used for further production * Economic capital * Financial capital, an economic resource measured in terms of money * Capital (Marxism), a central concept in Marxian critique of political economy *Capital good *Natural capital *Public capital * Human capital *Instructional capital * Social capital Architecture and buildings * Capital (architecture), the topmost member of a column or pilaster * Capital (fortification), a proportion of a bastion * The Capital (building), a commercial building in Mumbai, India Arts, entertainment and media Literature Books * ''Das Kapital'' ('Capital: Critique of Political Economy'), a foundational theoretical text by Karl Marx * '' Capital: The Eruption of Delhi'', a 2014 book by Rana Dasgupta * ''Capital'' ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
