Value investing — buying securities trading below their intrinsic value — is the philosophy behind Warren Buffett's extraordinary track record. Whether individual investors can replicate it in 2026's information-saturated markets is a legitimate debate.
The core concept: intrinsic value
Every business has an intrinsic value — what it's worth based on future cash flows discounted to present value. When the stock price falls significantly below intrinsic value, value investors buy. When price exceeds intrinsic value, they sell or avoid.
The key metrics value investors use
| Metric | What it measures | "Value" threshold |
|---|---|---|
| P/E ratio | Price relative to earnings | Below sector average or below 15 |
| P/B ratio | Price relative to book value | Below 1 (price below assets) |
| Free cash flow yield | FCF / Market cap | Above 5–6% |
| Debt/equity ratio | Financial leverage | Below 1 for most sectors |
| Return on equity | Profitability on shareholder capital | Consistently above 15% |
The margin of safety principle
Benjamin Graham's foundational concept: only buy when the stock trades at 30–50% below your calculated intrinsic value. The margin of safety protects against errors in your valuation and unexpected business deterioration.
Does value investing still work in 2026?
The evidence is mixed. Traditional value (low P/E stocks) underperformed growth significantly from 2010–2020. Value had a strong comeback in 2022. The academic debate continues. For individual investors without professional resources: index investing remains the evidence-superior choice vs attempting to implement value investing without significant research capacity.
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About the author
Enrique 'Kike' Faúndez is an Information Systems and Management Control Engineer from Universidad de Chile, with master’s degrees in Finance from Universidad de Chile and Industrial Engineering from Pontificia Universidad Católica de Chile. He has 15+ years of experience in regulated financial services across finance, operations, and digital product development. He founded CashControlly in Santiago, Chile, with the conviction that personal financial control should not be a privilege, but an accessible and well-designed tool.
- Master's in Finance, Universidad de Chile
- Master's in Industrial Engineering, Pontificia Universidad Católica de Chile
- Information Systems and Management Control Engineer, Universidad de Chile
- AI and ITIL certifications
- 15+ years in regulated financial services
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