The investment philosophy commonly known as ‘Value Investing’ originated at Columbia University in New York in the late 1920s. Iconic figures such as Warren Buffett have contributed greatly to the popularity of this approach.

It is surprising to note that, despite its proven success, few fund managers adopt this methodology.

The entire methodology is based on the idea that there may be a significant mismatch between a company's value and its stock market price, and that over time, this difference tends to disappear. The aim is not to identify the exact reasons for this difference, but rather to know how to take advantage of it. Since a company's price is readily available, the difficulty lies in estimating its value.

A company's value derives mainly from the value of its assets and their ability to generate profits. Past profits alone cannot guarantee future profitability.

By considering several other factors, we can achieve a reasonable degree of certainty about future profitability. These factors include the business model and characteristics of the company's sector, its competitive position, and the integrity and competence of its management.

After estimating a company's value, we purchase shares only if their price is significantly lower than our estimate of intrinsic value. The difference between the price paid and our estimated value is our “Margin of safety”.

The margin of safety provides a double benefit to the portfolio: it reduces the risk of permanent capital loss while considerably increasing potential returns.