Yesterday I covered a 2006 talk, “Journey Into the Whirlwind: Graham-and-Doddsville Revisited,” by Louis Lowenstein*, then a professor at the Columbia Law School, in which he compared the performance of a group of “true-blue, walk-the-walk value investors” and “a group of large cap growth funds”. Lowenstein based the talk on an earlier paper he had written “Searching for [...]
Archive for the ‘Value Investment’ Category
Searching for Rational Investors In a Perfect Storm: Value Investing Through 1999-2003
Posted in About, Value Investment, tagged Value Investment on May 25, 2012 | 3 Comments »
The Superinvestors of Graham-and-Doddsville Revisited: Value Trounces Growth in Mutual Funds
Posted in About, Stocks, Strategy, Value Investment, Warren Buffett, tagged Value investing, Warren Buffett on May 24, 2012 | Leave a Comment »
The Superinvestors of Graham-and-Doddsville is a well-known article (see the original Hermes article here.pdf) by Warren Buffett defending value investing against the efficient market hypothesis. The article is an edited transcript of a talk Buffett gave at Columbia University in 1984 commemorating the fiftieth anniversary of Security Analysis, written by Benjamin Graham and David L. Dodd. In a 2006 [...]
Equal Weight and Fundamental Indexing Beats The Market
Posted in About, Behavioral economics, Quantitative investment, Stocks, Strategy, Value Investment, tagged Dylan Grice, Joel Greenblatt, Magic Formula, Value investing on May 16, 2012 | 3 Comments »
Joel Greenblatt’s rationale for a value-weighted index can be paraphrased as follows: Most investors, pro’s included, can’t beat the index. Therefore, buying an index fund is better than messing it up yourself or getting an active manager to mess it up for you. If you’re going to buy an index, you might as well buy the best one. An index based [...]
Value-Weighted Indexing: The Problem with Active Management
Posted in Behavioral economics, Stocks, Value Investment, tagged Joel Greenblatt, Value-Weighted Index on May 15, 2012 | 4 Comments »
Joel Greenblatt’s rationale for a value-weighted index can be paraphrased as follows: Most investors, pro’s included, can’t beat the index. Therefore, buying an index fund is better than messing it up yourself or getting an active manager to mess it up for you. If you’re going to buy an index, you might as well buy the best one. An index based [...]
Should the business cycle affect the choice of price ratio? Asset-based measures versus earnings and cash flow-based measures
Posted in About, Enterprise Multiple, Strategy, Value Investment, tagged Business Cycle, NBER, Price Ratio, Value investing on May 3, 2012 | 1 Comment »
In their March 2012 paper, “Analyzing Valuation Measures: A Performance Horse-Race over the past 40 Years,” Wes Gray and Jack Vogel asked whether the business cycle should affect our choice of price ratio: For example, cash-focused measures, such as free-cash-flow, might perform better during economic downturns than accounting-focused measures like earnings. Or perhaps a more asset-based [...]
Do long-term, normalized price ratios outperform single-year price ratios?
Posted in About, Enterprise Multiple, Stocks, Strategy, Value Investment, tagged Enterprise multiple, Normalized Price Ratio, Stocks, Strategy, Value investing on May 2, 2012 | 8 Comments »
In their March 2012 paper, “Analyzing Valuation Measures: A Performance Horse-Race over the past 40 Years,” Wes Gray and Jack Vogel asked, “Do long-term, normalized price ratios outperform single-year price ratios?“ Benjamin Graham promoted the use of long-term, “normalized” price ratios over single-year price ratios. Graham suggested in Security Analysis that “[earnings in P/E] should cover a [...]
Which price ratio outperforms the enterprise multiple?
Posted in About, Enterprise Multiple, Stocks, Strategy, Value Investment, tagged Enterprise multiple, Enterprise Value, Price ratios, Stocks on May 1, 2012 | 12 Comments »
Friends, Romans, countrymen, lend me your ears; I come to bury Caesar, not to praise him. Having just anointed the enterprise multiple as king yesterday, I’m prepared to bury it in a shallow grave today if I can get a little more performance. Fickle. In their very recent paper, “Analyzing Valuation Measures: A Performance Horse-Race over the past [...]
Active versus passive value investing: Does spending time researching a company’s fundamentals generate higher returns?
Posted in About, Stocks, Strategy, Value Investment, tagged Active value investing, Stocks on April 27, 2012 | 10 Comments »
Aswath Damodaran, in his excellent paper “Value Investing: Investing for Grown Ups?”, asks whether spending time researching a company’s fundamentals (“active” investing) generates a higher return for investors than a comparable value-based index (“passive” investing)? Says Damodaran: Of all of the investment philosophies, value investing comes with the most impressive research backing from both academica and practitioners. [...]
Value investing works, so why do value investors underperform? The evidence for activist value investors
Posted in Activist Investors, Stocks, Value Investment, tagged Activism, Activist Investors, Stocks, Value investing on April 26, 2012 | 4 Comments »
This week I’ve been taking a look at Aswath Damodaran’s paper ”Value Investing: Investing for Grown Ups?” in which he asks, “If value investing works, why do value investors underperform?” Damodaran divides the value world into three groups: “The Passive Screeners,” – “The Graham approach to value investing is a screening approach, where investors adhere to strict screens… [...]
Value investing works, so why do value investors underperform? The Passive Screeners
Posted in Stocks, Strategy, Value Investment, tagged Price ratios, Value investing on April 24, 2012 | 14 Comments »
Abnormal Returns asks “If value investors are the “grown ups” of the investment world, why aren’t their returns better?” and links to a great Aswath Damodaran paper “Value Investing: Investing for Grown Ups?” in which Damodaran examines the reasons why over an epic 77 pages. Damodaran begins by asking, “Who is a value investor?” He divides the value [...]
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