What do we mean by value? Benjamin Graham, in his classic book The Intelligent Investor, highlighted the attractions of value stocks.
His advice, in essence, was two-fold:
- Don’t buy the shares of poor quality businesses.
- Don’t overpay for the shares of high quality businesses.
Value investing can be summarised as looking to buy dollar bills, but only paying 40 or 50 cents for them. Buying listed businesses with high quality management and an enduring competitive advantage, but at a meaningful discount to their fair value, offers a ‘margin of safety’ to the prudent investor – the margin between a (hopefully temporarily) low share price and the company’s inherent true worth.
‘Margin of safety’ is a key component of value investing. The Price Value Portfolio seeks to invest in a small number of specialist value funds from around the world with managers explicitly pursuing a Benjamin Graham value approach. We also seek to invest in a small number of diversified holding companies of exceptional quality that we believe are trading at a meaningful discount to their inherent value.
The Price Value Portfolio is not indexed or benchmarked and is relatively concentrated by number of underlying holdings. The managers of the portfolio will only deploy capital into those funds – and shares of listed businesses – in which they have the highest conviction.
The intention of the managers is to maximise investment returns over the medium term while endeavouring to avoid the risk of a permanent loss of capital on any one investment.
The Price Value Portfolio invests internationally on an entirely unconstrained basis.