What Is Value Investing?

So, what is value investing?

At its core, it’s the practice of buying stocks for less than they’re worth — below their intrinsic value.

Sounds simple enough, right? Until you stop and ask: what exactly is intrinsic value?

Intrinsic value is what a business is truly worth. Not the number flashing on a stock ticker, but the business’s ability to generate cash over its lifetime. Think of it this way: if you owned 100% of a business, how much money would it realistically put in your pocket over time? That’s what you’re trying to estimate.

Of course, no one can predict future cash flows perfectly. You can only make informed, reasonable guesses. That means looking at the strength of the business, the consistency of its earnings, the durability of its competitive advantage, the intensity of the competition, and the competence and honesty of the management team. Intrinsic value is never a single number — it’s a range, a judgment call, and a reflection of how well you understand the business.

The Process

Finding that intrinsic value means digging deep. A stock isn’t just numbers moving on a screen. It represents a piece of ownership in a real, operating business.

You need to think like an owner. That means studying every serious competitor. Who has the edge? Who’s falling behind? Who might erode your market share or profits? What are the smaller players doing? And most importantly, can this business protect its turf — not just now, but for years to come?

Thinking Deeply

You have to read financial statements, study the economics of the business, understand how it earns money, consider where it is in its lifecycle, and evaluate how it’s perceived by customers or users. Then you try to picture its place in the world — not just today, but far into the future — and estimate how those cash flows translate into value for you as a shareholder.

As Warren Buffett puts it: “Price is what you pay. Value is what you get.”

The market gives you the price. Loud and clear, every second. But value? That’s up to you to uncover through your work.

Because we’re human and humans make mistakes, we build in a margin of safety. This is the cushion between what something is truly worth and what you pay. It protects you from being wrong.

You need to think in layers: layers of protection, layers of risk, layers of what could go wrong. You can’t prevent problems altogether, but you can anticipate them and factor them into your decisions. Paying below intrinsic value gives you that protection — basically trying to buy a dollar for sixty cents, or whatever your analysis suggests.

Temperament

Benjamin Graham, in The Intelligent Investor, wrote that “being an intelligent investor is more a matter of character than brain.”

Sure, you need the skills to read financial statements, interpret data, and make sense of complex relationships. But where most people stumble is after the purchase, when a stock falls or rises sharply in price.

When it drops, they feel stupid.
When it soars, they feel invincible.

That emotional rollercoaster — not the stock itself — is what makes investing so dangerous for the average person. People buy and sell based on fear or excitement rather than careful analysis.

I’m not going to tell you to detach emotionally or pretend you’re a robot. That’s not realistic.

What I will say is this: if the fundamentals haven’t changed, ignore the noise. Go for a walk, go for a swim. And if the price drops further, consider buying more. Graham puts it perfectly: “The stock market is there to serve you, not to instruct you.”

If the market shakes your confidence in a well-studied business, the problem isn’t the market — it’s your temperament.

Thank you for reading. If this resonated with you, give it a like, share it, and join the club. I’ll be sharing more thoughts on value, business stories, and what I’m learning along the way.

Written by Himanshu Sharma