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The Most Important Thing Is The Price Tag

This group's primary theme is value investing. Value Investing is a discipline originated by Ben Graham about 80 years. As such, it has become a mature discipline that many great thinkers and investors have contributed to. We now have many things to think about... management, corporate governance, business model, competitive positioning, industry prospects, macroeconomic health and growth, employee relations, profitability, etc. I could go on.

It is easy to get into the trap of trying to focus on all of these things and trying to do to much. Our brains are not capable of that. I am reading an excellent book, The Little Book of Behavioral Investing, which cites studies showing that the human mind can only consider about 5 variables in making a decision. Introducing more information/variables after that actually starts to decrease decision quality.

Given our limited capacity, what do we focus on among the endless information available to us? I am absolutely confident of the answer: price.

A cheap price is far and away the most important investment criteria. It can be evaluated in many ways using many metrics. Something can look cheap relative to past earnings power, asset values, future earnings power, sales, etc. An investor should look at all these metrics, and feel most confident when they come together to form a mosaic that shows a clear, beautiful image: a cheap stock.