Course 110: Buying at a Discount to Fair Value
Waiting for the Fat Pitch
In this course
1 Introduction
2 Price Matters
3 Waiting for the Fat Pitch
4 Margin of Safety

So the question is: How do I make sure I don't overpay for something? The answer: If the pitcher doesn't throw one right down the middle, you don't have to swing the bat. Unlike in baseball, there is no penalty for being patient in investing. With the market pitching, you can let as many knuckleballs and sliders go by as you want and only swing at the slow pitches that come right down the middle.

What this means is that you should spend a fair amount of time placing a value on a stock before you even think about buying it, and only buy stocks that you are confident are undervalued.

Learning how to value a stock takes work, but it can be done. For those who want to learn how to do this themselves, our entire Stocks 300 track deals with this topic. For others who want to leave some of the heavy lifting to someone else, Morningstar's stock analysts also publish their estimates of fair value for roughly 500 stocks.

Next: Margin of Safety >>

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