The

Value Investing
Cheat
Sheet
 What is Value Investing?

Value investing is a strategy that focuses on investing in individual stocks of

wonderful companies that are priced well below their true value.

Of the many different investing

strategies that a modern-day
investor has to choose from,
value investing is among the
most tried and true of them all.

It is the foundation of Rule

#1 Investing because, when
applied appropriately, it can
be one of the best ways to
ensure success in the stock
market.

Plus, it is the investing strategy used by some of

the most successful investors in history such as
Ben Graham, Warren Buffett, and Charlie Munger.

Value investing helps to reduce risk by knowing what

companies to buy and ensuring smarter investment
decisions.

And that starts by being able to spot a true “value stock.”

The Value Investing Cheat Sheet

For more information, visit ruleoneinvesting.com 1
What is a At its core, a value stock is a stock that is priced

Value
lower than its intrinsic value.

Stock?
The key word there is intrinsic.

Value investors make decisions based not on a news

article or another investor’s actions, but on the intrinsic
value of a company, or what it’s actually worth, not to
be confused with its sticker price.

It’s critical to know that the sticker price you see doesn’t
always equal the true value of a company.

The companies themselves have to Warning

have a well-established history and
show great potential for growth over Just because a company is
time. This is why a deep understanding “cheap” doesn’t make it a
of the companies you invest in is value stock.
foundational to value investing.

We Rule #1 investors define a value

stock as a stock in a wonderful
company that is priced at 50% of its
actual value.

The Value Investing Cheat Sheet

For more information, visit ruleoneinvesting.com 2
 How to Identify a Wonderful Value Stock
Finding undervalued companies is not easy, but with a bit of time and effort it can be done, and
anyone—including you—can learn how to do it. I like to evaluate whether or not a company is
of quality with what I call:
The 4 Ms of Successful Value Investing
Meaning
You are capable of understanding
what this business’ product,
service, or idea is all about and
will be more likely to do the research
necessary to understand all elements
of the business that affect its intrinsic
value.
Moat
The company has something unique
that separates and protects them
from the competition. If a company
has patented technology, market
control, an impenetrable brand, or a
product or service customers would
never switch from, it has a moat.
NOTE: Before you even consider investing
in a company, you MUST be able to check
off all four Ms for it to be worth your
while. That’s the bottom line.
Management
The leaders in charge of guiding the
company you’re planning to invest
in have shown signs of integrity
and proven success from their prior
decisions. You believe that they are
solid leaders that will take the
company in the right direction.
Margin of Safety
In order to guarantee good returns
and buy with confidence, you must buy
a company at a price that gives you a
50% margin of safety price - meaning
you’re aiming for a price that is HALF
of what we think it’s worth.
While all important, this Margin
of Safety “M”is arguably what
truly makes your investment a
“value investment.”
The Value Investing Cheat Sheet
For more information, visit ruleoneinvesting.com 3
 Value Investing vs. Other Strategies

Comparing and contrasting the advantages and disadvantages of value investing with other
investment strategies can help you get a better understanding of what exactly it is and what it
is not.

Let’s discuss the key differences between some of the most popular strategies and value
investing.

VALUE INVESTING OTHER STRATEGIES

• Focuses on growing wealth over
time
• Minimizes risk by maximizing
knowledge and research
Day Trading
• Focuses on the very short-term.
vs
• Gambling—betting on short-term
fluctuations with high risk, whereas
value investing

SALE Growth Investing

• Targets companies that are “on • Targets companies that are growing
sale” vs at a rapid rate

• Backed by proven track record over • Requires being able to predict

the past 10+ years who will dominate in high-growth
industries

• Requires very little money to get
started and see returns
vs
• Tends to focus more on the earning
and growth over time when
determining the value of stock
Income Investing
• Requires a large sum of money
upfront in order to see returns
• Tends to focus more on the
dividend when determining the
value of stock

The Value Investing Cheat Sheet

For more information, visit ruleoneinvesting.com 4
 5 Key Rules
for Successful
Value Investors

Value investing is not all that complex. It’s just a matter of learning the
time-tested principles and following them. Here are a few key rules that the
most successful investors never stray from.

1 Focus on the Long-Term

Value investing is not a get-rich-quick scheme, it’s a buy-and-hold

strategy. Once you manage to find a company that is priced lower than its
actual value, it takes time for the market to correct itself and drive up the
price of that company.

When operating as a value investor, you need to be patient and keep your
focus on long-term profits.

2 Don’t Fall Prey to Fear

The value investor is unlike other investors in that he or she isn’t swayed
by the general public’s reaction. This is especially important to remember
when fear comes into play. Fear can make people sell too early or miss
an opportunity to buy. But the value investor decides when to buy or sell
based on a company’s intrinsic value, not based on fear in the stock market.

For the value investor, fear is a friend. Fear moves the market all the time,
and if it isn’t justified, it could create excellent opportunities to buy
wonderful companies well below their value.

The Value Investing Cheat Sheet

For more information, visit ruleoneinvesting.com 5
3 Be Patient

When you analyze a company thoroughly, you may discover that it would make
a wonderful investment but it’s not undervalued by the market… but that
doesn’t mean it won’t become undervalued at some point.

A key component of value investing is buying stocks at the right time, and
the right time will present itself if you’re patient. This includes everyday stock
market volatility and less frequent events such as recessions and market
crashes.

4 Do Your Research

Successful value investors certainly do not pick stocks at random. Instead,

before investing in a stock, they thoroughly analyze it in order to determine
its value investment potential.

True value investments require a bit of research. In order to have a deep

understanding of the companies you are investing in, you have to get to know
their fundamentals: how they operate, the pros and cons of their industry,
their management, their financials, and more. But the more you know, the
better decisions you’ll make and the better returns you’ll get.

5 Invest with Your Values

Think about where you spend your money today. Do you eat at McDonald’s or
buy organic products from Whole Foods? Do you purchase mostly business-
wear or mostly leisure-wear? Chances are, you already know what’s important
to you - so you can use your money to continue to support what you
believe in.

Remember that wherever you’re putting your money is what is going to grow in
the world. By making the decision to invest based on our personal values, we
can change the world radically.

Plus remember, you’re going to be researching this company A LOT. You will be
so much more motivated to put in the time and (hopefully) excited to learn all
about this wonderful company if it truly aligns with your interest.

The Value Investing Cheat Sheet

For more information, visit ruleoneinvesting.com 6
 Value Investing Resources

You wouldn’t jump in the ring without knowing the basics of boxing, so you shouldn’t
jump into the stock market without knowing the basics of value investing.

Take advantage of investing resources and learn as much as you can to ensure your
success.

Rule #1 offers endless resources - from blogs, to podcasts, to videos - that are
free, easy to follow, and designed specifically for value investors.

Free Webinar

To start your educational journey,

join me at my Free 1-Hour Investing
Webinar where you’ll get all the basics
you need to confidently pick stocks and
build your first watch list.

Claim your free spot here!

The Value Investing Cheat Sheet

For more information, visit ruleoneinvesting.com 7
 About Phil
Phil Town is an expert investor, 3x New York Times Best Selling

Author, and founder of Rule #1 Investing, the largest value

investing training company in the world.

Phil Town’s Rule #1 strategy was ranked #1 highest return in

the US in 2014 at 56.4% and the #2 highest return in 2019 at

62.6% by the American Association for Individual Investors.

For more than 15 years Phil has been teaching students how to invest with low-risk, high-yield strategies

pioneered by Warren Buffett and Charlie Munger at his 3-day Transformational Investing Workshops. These

workshops have been hosted for students in the U.S.A., Canada, Singapore and many other countries,

as well as online during the COVID-19 pandemic. Town has spoken to over 2 million people and been on

stage with Presidents Ford, Carter, Clinton, and Bush as well as many other notable names including Prime

Ministers Margaret Thatcher and Benjamin Netanyahu and General Secretary Mikail Gorbachev.

Phil and his daughter, Danielle Town, co-host the podcast, InvestED, one of US News and World Report’s

“Top Nine Financial Podcasts”, where listeners gain insights on investing as Phil teaches the secrets of

Warren Buffett style investing. Phil Town has been featured on CNBC, FOX, MSNBC, Forbes, New York

Times, and more and runs a successful YouTube channel with over 400,000 subscribers.

Connect with Phil:

Website | Podcast | Books