Margin of Safety

  • 09 Nov
    Margin Of Safety – Is It A Method Or A Mindset?

    Margin Of Safety – Is It A Method Or A Mindset?

    • Many would like the formula for calculating intrinsic value and deriving a margin of safety.
    • I’ll discuss a few issues about the margin of safety that are mostly up to one’s personal preferences.
    • There are also some issues with a margin of safety. It’s not really free.



    Introduction

    I get lots of questions about how to properly value a company, what the best method is to determine intrinsic value, what clear buying signals look like, and especially a lot of questions on the best valuation metrics and financial indicators to use.

    I completely understand where these questions come from as it’s in our nature to simplify things and look for the magic formula that has all the answers, especially in an uncertain environment like financial markets are. However, investing and especially value investing, isn’t that easy. More →

  • 03 Nov
    This Stock Could See A Fivefold Increase In Price, But The Risks Are Huge

    This Stock Could See A Fivefold Increase In Price, But The Risks Are Huge

    Being a value growth investor, I’d recommend a stock that has a strong margin of safety—thus little chance of permanent capital loss—while also having huge upside coming from market recognized or unrecognized catalysts.

    There are some investments out there where the potential loss is total while the potential upside is extremely high. I wouldn’t call these investments, and only would recommend one as it’s more like a bet.

    To keep things interesting, today I want to share with you such a bet by discussing a non-linear stock with out of the box thinking management, McEwen Mining (NYSE: MUX). MUX will give you a clue as to how I research potential investments and analyze their risk reward ratios.



    McEwen Mining

    MUX is a producing, developing, and exploring gold/coper miner. Currently, it produces only gold, so the market puts it into the gold miners basket. Nevertheless, it has 3 producing mines in Ontario, Mexico, and Argentina, two gold mines in development, and various exploration targets. More →

  • 25 Oct
    How To Calculate Intrinsic Value & Why You Need To

    How To Calculate Intrinsic Value & Why You Need To

    • Calculating the intrinsic value of a stock is essential for making any kind of buy or sell decision.
    • However, intrinsic value is different for everyone and depends on what you expect from the market.
    • Attaching a margin of safety to intrinsic value is all you need for low risk high return investments.



    Introduction

    99% of the what’s discussed about stocks is whether a stock is undervalued or overvalued and where will it go as you wouldn’t be a proper analyst without a price target on every stock you discuss.

    This is completely the wrong way to approach investing, but we as analysts will continue to deliver what the market wants. More →

  • 28 Sep
    This Is How You Find Stocks With A Margin Of Safety

    This Is How You Find Stocks With A Margin Of Safety

    • It’s impossible to accurately determine the actual value of a stock, but there are some methods that allow you to come close.
    • What’s even better is when you can buy at a price much lower than your intrinsic value calculation.
    • Qualitative factors can also help in assessing the margin of safety.

    Introduction

    The best investments are those that carry no risk with unlimited upside.

    Given that the markets are inefficient, it’s possible to find such investments and in today’s article, I’m going to describe the best ways to figure out what the margin of safety is in an investment. More →