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 [...]
Posts Tagged ‘Value investing’
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 »
Dividend Yield Doesn’t Work, What Does? Three Key Conclusions
Posted in About, Stocks, Strategy, tagged Value investing on May 23, 2012 | 1 Comment »
A recent study by Wes Gray and Jack Vogel, Dissecting Shareholder Yield, makes the stunning claim that dividend yield doesn’t predict future returns, but more complete measures of shareholder yield might hold some promise. Gray and Vogel say that, ”regardless of the yield metric chosen, the predictive power of separating stocks into high and low yield portfolios [...]
Equal Weight and Fundamental Indexing Beats The Market
Posted in About, Stocks, Value Investment, Quantitative investment, Behavioral economics, Strategy, tagged Value investing, Joel Greenblatt, Magic Formula, Dylan Grice 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 [...]
Joel Greenblatt’s solution to value investors’ behavioral errors
Posted in About, Stocks, Quantitative investment, Behavioral economics, Strategy, tagged Value investing, James Montier, Joel Greenblatt on May 14, 2012 | 2 Comments »
Last week I looked at James Montier’s 2006 paper The Little Note That Beats The Market and his view that investors would struggle to implement the Magic Formula strategy for behavioral reasons, a view borne out by Greenblatt’s own research. This is not a criticism of the strategy, which is tractable and implementable, but an observation on how pernicious our [...]
How to beat The Little Book That Beats The Market: An analysis of the Magic Formula
Posted in About, Stocks, Warren Buffett, Behavioral economics, Strategy, Enterprise Multiple, tagged Value investing, Stocks, Joel Greenblatt, Magic Formula, Enterprise multiple, Enterprise Value, Strategy, The Little Book That Beats The Market on May 7, 2012 | 9 Comments »
Since Joel Greenblatt’s introduction of the Magic Formula in the 2006 book “The Little Book That Beats The Market,” researchers have conducted a number of studies on the strategy and found it to be a market beater, both domestically and abroad. Greenblatt claims returns in the order of 30.8 percent per year against a market [...]
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 [...]
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 evidence for contrarian value investors
Posted in Contrarian investment, Stocks, Strategy, tagged Aswath Damodaran, Stocks, Value investing on April 25, 2012 | 8 Comments »
Yesterday, I examined Aswath Damodaran’s paper ”Value Investing: Investing for Grown Ups?” in which Damodaran asked, “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… and pick stocks that pass those [...]
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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