Warren Buffett once said that “margin of safety” has been the bedrock of his investing success for decades.
In investing, margin of safety is about leaving room for error because you never know what will happen in the future.
But how can you apply this concept when you invest?
For some, it is about applying a discount to the underlying asset's value. The higher the discount percentage, the more you are protected against unforeseen risks.
This article takes a different approach. The value created by a business is my margin of safety.
When you pick growing businesses which are already doing well, all you have to figure out is whether they can continue doing well in the future.
This business puzzle, to me, is easier to solve.
Ultimately, the way you put "margin of safety" into practice will make all the difference.
So, what would you choose?
There is no right or wrong answer – just your answer.
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Some famous words of Buffett. I hope it's useful to you. : )
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not-a-cow : Why does "value created by a business" equal FCF?
牛转乾坤19 not-a-cow: FCF reflects the real cash flow of the enterprise. Whether it is used to repay debts, invest, buy back stocks or pay dividends, it will create value