May
7
“The reason we build in margins for error is because we are uncertain about our own estimates of intrinsic value, but that uncertainty is not the same for all stocks. Thus, I would feel perfectly comfortable buying stock in Con Ed, a regulated utility where I feel secure about my estimates of cash flows, growth and risk, with a 20% margin of safety, whereas I would need a 40% margin of safety, before buying Google or Apple, where I face more uncertainty. In a similar vein, I would have demanded a much larger margin of safety in November 2008, when macro economic uncertainty was substantial, than today, for the same stock.”
Musings on Markets: Margin of Safety: An alternative risk assessment tool?
