Margin of Safety in Value Investing

The idea of buying a company at a bargain price is to achieve a margin of safety. This is important to provide a buffer if business events don't turn out exactly as predicted (and they won't).

• The value investing style calls for building in margins of safety by buying at a reasonable price.
• The style also suggests finding margins of safety within the business itself, for instance, so-called "moats" or competitive advantages that differentiate the business from its competitors.
• Also, a large cash hoard or the absence of debt offers a financial margin of safety.