Protect the downside. Worry about the margin of safety.
The difference between the price we pay for a stock and its liquidation value gives us a margin of safety. This kind of investing is one of the most effective ways of achieving good long term results.
One of the dangers about net-net investing is that if you buy a net-net that begins to lose money your net-net goes down and your capacity to be able to make a profit becomes less secure. So the trick is not necessarily to predict what the earnings are going to be but to have a clear conviction that the company isn't going bust and that your margin of safety will remain intact over time.
We always look at the margin of safety in the balance sheet and then worry about the business.
