Everything You Need to Know About Investing Philosophy.

 In May 1984, Mr. Warren Buffett laid out everything you need to know about his investing philosophy.

In a speech at Columbia Business School, later adapted into an essay , Buffett introduced what he called “The Superinvestors of Graham-and-Doddsville“.

Mr. Buffett writes: “The common intellectual theme of the investors from Graham-and-Doddsville is this: they search for discrepancies between the value of a business and the price of small pieces of that business in that market.“

And that's pretty much it. Buffett does not think about buying a stock; he thinks about buying a business. The name “Grahamand-Doddsville“ comes from the names of Benjamin Graham who Buffett studied under at Columbia and Dave Dodd, with whom Graham literally wrote the book on security analysis.

 

Warren Buffett

And the strategy seems to be working out okay: on Thursday , Class A shares of Buffett's Berkshire Hathaway eclipsed $ 2,00,000 per share for the first time, and $1,000 invested with Buffett in 1984 would've been worth $ 1,55,301.

And since 1969, the book value of Berkshire Hathaway which Buffett acquired in 1964 has beaten the S&P 500 43 out of 44 years on a 5-year rolling basis. The relative value of Berkshire Hathaway shares have been worth more than the S&P 500 collectively every year but one.

Is not he just giving away the secret? “I can only tell you that the secret has been out for 50 years,“

Buffett writes, “...yet I have seen no trend towards value investing in the 35 years I've practised it.There seems to be some perverse human characteristic that likes to make easy things difficult. The academic world, if anything, has actually backed away from the teaching of value investing over the last 30 years. It's likely to stay that way . Ships will sail around the world, but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace, and those who read their Graham & Dodd will continue to prosper.“

Indeed, all of the research continues to show that the vast majority of professional and retail investors are underperforming.



SRC: Business Insider

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