- There are two primary approaches to generating outstanding returns: 1) buy a stock that is selling for less than intrinsic value and 2) buy a stock that is growing intrinsic value at a high rate. Combining the two, as the hypothetical examples in the graphs show, can lead to significantly outsized returns.
- The second graph shows the power of making intelligent repurchases of shares. This means purchasing shares when they are selling for less than intrinsic value. A close examination of a CEO’s track record for repurchasing shares can tell you a lot about his ability to allocate capital. Look to see whether shares are purchased when shares are over or undervalued.