Factor Investing Part 3 - Value Factor
A value stock could be one that is priced low relative to its cash-flow, its book value (its assets minus its liabilities), or its sales. Warren described his early value stock picks as “cigar butts” - stocks of companies that were so distressed that their total outstanding stock value was actually worth less than the book value of the company. His style has evolved since those early years, but his philosophy has remained intact. His strategy is to buy stocks of quality companies at relatively low prices and hold onto them for a long time.