Part 3 of 5 The Value Investor Journey

How the masters think

Mohnish Pabrai calls himself a "shameless cloner" — he built a fortune by studying the great investors and simply copying what works. You can too. So meet eight of the finest minds in investing: first a short introduction to who they are and why they matter, then, chapter by chapter, the principles that made them — each with real scenarios to make it stick.

Intrinsic Value
What a business is actually worth, based on the cash it can generate — independent of its current share price.
Margin of Safety (MoS)
The discount between a stock's price and its intrinsic value. A buffer that protects you when your analysis is partly wrong.
Moat
A durable competitive advantage (brand, switching costs, cost advantage, network effects) that protects a company's profits from competitors.
Free Cash Flow (FCF)
The cash a business generates after operations and investments — the money truly available to owners.
NCAV
Net Current Asset Value = Current Assets minus Total Liabilities. What's left for shareholders if every debt were paid today.
P/E ratio
Price-to-Earnings: the share price divided by earnings per share. A rough gauge of how expensive a stock is relative to its profits.
D/E ratio
Debt-to-Equity: total debt divided by shareholder equity. A measure of how much leverage (debt) a company carries.
Value Trap
A stock that looks cheap on the numbers but is cheap for a good reason — a business in genuine decline.

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