How do you assess your margin of safety?

Assessment of the margin of safety.

Any idea on this?

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Value Digger
Value Digger


Interesting question. First, I follow a top-down approach. In other words, the due diligence starts with the strength of the economy both in North America and globally, I continue with the global macro trends and finally focus on identifying specific industry trends and stocks in North America. On that front, I will look at the performance of the overall sector or industry that a stock is in because I believe that if the sector is doing well, chances are, my pick from this sector will also do well. That said, my margin of safety is largely determined by the following three factors: Low valuation on key metrics, low leverage and high insider ownership.