True, Graham was Warren Buffett’s teacher and mentor. But Buffett’s value investing style developed into something markedly different than Graham’s. His biggest evolution has been his willingness to pay a fair price for a truly superior company. I think it was Buffett who said something to the effect that it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

To me, value investing is the smartest, safest, and, in the end, most lucrative approach to investing in the stock market. But it’s also important to realize that there will never be a single definition of value investing. The great value investors–Graham, Buffett, John Neff, Wilber Ross, and even Bill Miller–all have/had their own unique approach to value investing.

Likewise, it’s also up to individual value investors to discover their own approach to the subject. The idea is to acquire valuable assets for less than their true value. How you go about that has to mesh with your own analytical abilities and psychological make up. I actually use certain option trading techniques as a way to be a better value investor.

I’m reading a book called Super-Crunchers right now. The book talks extensively about people who crunch lots of numbers and follow the data. But he also talks about the value of “intuition” in knowing what numbers to pull from within the sea of data.

As a guy who works at a company pushing 2 terabytes of data / week, I can tell you that more data is useless if you don’t know what you’re looking for. It’s worse when you’re working with a growing system b/c you have to evaluate things like data quality and data timeliness.

I wouldn’t say that having tons of data is really a disadvantage. If anything the sheer accessibility opens the doors for people who were previously uncompetitive b/c of “hard-to-find” data.

At the end of the day, it still comes down to knowing how to interpret data and pick out facts from Red Herrings. Whether across 2 pages or 20.

Great article. Most of the best investors of all time use Graham’s style, and yet there has been no major increase in investors using his style. Check out Warren Buffett’s famous and amazing article about the “Super-investors of Graham-and-Doddsville”: http://www.tilsonfunds.com/superinvestors.html in which he chats about a few guys he bumped into that all had returns far higher than their indexes. Since that article, the few of those investors still active have all continued to beat their indexes by wide margins over long periods.

It’s amazing that in the last 80 years, there are essentially no investors with Graham’s wisdom. Could it be that all the tons if info available to investors today is a huge disadvantage?

I read Graham’s first book “Security Analysis” (okay, I listened to the book on CD) and was shocked to find that he wrote it in 1934 – just after an 83% market crash. That is when he was recommending stocks for the long run!

Ed

http://moneycentral.msn.com/investor/controls/finderpro.asp

Thanks for posting these picks. Two nice value investing sites are http://www.thediv-net.com and http://www.fatpitchfinancials.com

My only concerns for the screen above is that the minimum market cap has to be 400million, which is a lot.

Value Investing is not confined to only buying undervalued stocks, it also involves arbitrage, special situations, control situations etc.

This is another “classic” Graham screen, where you find stocks which sell for less than the amount of their current assets minus total liabilities. In other words if you were to purchase these businesses at the market price you are essentially getting a bargain. If you liquidate the business you are almost 100% guaranteed to make a profit.
http://www.grahaminvestor.com/screens/grahams_result

Also: For those trying to view the website with Firefox, you don’t get the option for Deluxe Screener. So you really do need IE. You’d think that MSN is owned by Microsoft! :-)

This will obviously have a huge impact on the actual results of these stocks.