Value advantage from Buffett - Always try and incorporate value, if possible, in your decisions

 ‘‘Long ago, Ben Graham taught me that price is what you pay but value is what you get. Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.’’ - Warren Buffett

This Buffett quote has been heard by many, but it is important to remember even if you are a trader who focuses trend, momentum or carry. Value can be a tailwind or a headwind and if possible, you would like to have it serve as trade enhancer. All else being equal, buy cheap and avoid rich assets. Investing in trends moving higher for a cheap commodity will always be better than a trend higher of a rich commodity. 

Now, there may be doubt about where there is value in the market. Goods can be marked down or on sale and still be rich, so valuation is not easy to determine. Unfortunately, value is a moving target. It may not change every day, but, regardless of price, value today may not be value next month or next year.   

In the case of most trend-followers, there is no sense for what is value so the question of buying cheap is avoided; however, if there is reason to believe that a commodity is rich or cheap, then use that information to create an advantage. Nevertheless, the harder it is to determine the difference between price and value, the more likely there is an advantage with following trends. Without good valuations, the focus must be on movement of price.