A third rule that Buffett has taken from Graham is to buy stocks with a large "
margin of safety," investments that currently sell significantly below their
intrinsic value. As CNBC notes, taking this bargain-hunting approach to investing should limit your potential losses in case your estimate of intrinsic value was too high, or if unforeseen events damage a company's once-rosy prospects.
I didn't know this and need to learn it. The value of the stock, it's total stock numbers, vs it's balance sheet(debts, investsment, expenses). U need to ensure the stock ur buying isn't over-valued I agree 100%, I just didn't know the 'method' to calculate, I probably still don't.
But im big proponent on 'business value' it's always in my head about the 'value' of policies, strategies, and productivity, etc in my previous work place, now I need to study 'buffet' method on how he 'calculates' shares on 'value'. Remember value is the most beautiful 'equation' i've understood. It's not about cheap or expensive. U cud buy something cheap but it doesnt perform like in somalia market, or u cud spend more for quality in the west and it will last forever. I suspect he views stock valuation with a similar lense of 'productivity gains' not how cheap or expensive it is.