An Integrated Framework for Finding Exceptional Businesses, Understanding Their Competitive Advantages, Valuing Them, and Investing With a Margin of Safety
Chapter 1 The Difference Between a Good Company and a Good Investment There is a simple mistake that investors make repeatedly. The company has an excellent product, loyal customers, strong financial results, an impressive management team, and a good future. The investor becomes convinced that owning the stock is an obvious decision. But there is a problem. A wonderful company can be a terrible investment if the price is too high. This distinction is one of the most important ideas in investing. A company and its stock are related, but they are not the same thing. The company is an operating business. It produces products or services, serves customers, employs people, invests capital, generates cash, and competes against other businesses. The stock is a claim on a portion of that business. The market price of the stock is simply the price investors are currently willing to pay for that claim. Those two things can diverge substantially. A great business can become dramatically more valu...