The purpose of this post is to add my endorsement of Jim's recommendation of Greenwald's book on Value Investing. Chapter 3 alone is worth the price of the book, particularly Figure 3.1 - the slices of value. These are:

Asset Value - Reproduction cost of assets under conditions of Free Access and No Competitive Advantages.

Earning Power Value - The franchise value from current competitive advantages

Value of Growth - Only if the growth is within the franchise and benefits from the competitive advantage.

Greenwald cautions that the last slice, the difference between the EPV and the VOG, is the most difficult to make and therefore the least reliable. Our investor will understand how much detailed knowledge of the industry and good judgment this decision requires. Thus the need for a margin of safety.

Jim breaks down these concepts into finer detail and expanded discussion. I highly recommend that one read all of Jim's comments and links - you'll learn a lot.

Tex

Berkshire Hathaway FAQ

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