Theory Of Value Investment And Application

The security market of our country is at a very important turning point. Its operation layout is going to change greatly. Initiating the concept of value investment in current situation meets the general trend of the mainstream in international investment.In 1943, with the publication of a book named "Security Analysis" written by Benjamin Graham and David Dodd, the value investment theory is born. The theory holds that only the investment in quilts which are underestimated by market or which have growing up value are safe. Benjamin Graham has proposed "safe limit" as the criterion of investment judgment. Therefore an accurate calculating of company's intrinsic value is quite critical for makinginvestment decision.The difference between value investment theory and "modern investment theory " lies in the following aspects. Firstly, for "MIT", many complex mathematical formula and forecast technology are introduced to decide the cost of investment asset. However on the other hand, "VIT" makes the investment decision differently. Considering company developing trend and macro-economic environment together, by the calculating of asset value, profit ability value and growing up value, the decision making is mainly based on the balance sheet. Secondly, "VIT" always takes reality as its basis. It is more practical and more rational when analyze the expecting profit, the future cash flow or judge the value of a invested company.Based on the comparison of many current popular assessment models, the practicality of Benjamin Graham's value theory is pointed out in this paper. Furthermore, the elaboration of three factors in Benjamin Graham's theory are given, that is, the asset value, profit ability value and growing up value. Then theexplanation of the inter-relationship between the three values and the way to evaluate correctly the role of the three values in investment are followed.Finally, taking the list company (new steel vanadium) as an example, a detailed analysis of calculating a company's intrinsic value by Benjamin ?Graham's theory is given, that is, how to use it to judge and to calculate a company's intrinsic value and how to use it to make investment decision by the calculating results. Through the evaluation of (new steel vanadium), this paper concludes: it is of realistic significance to apply Benjamin ?Graham's value investment theory to guide value investment in our country and to point a way to carry out value investment.