Graham
Strategic Concepts & Mechanics
Primary Evidence
"As Buffett points out, there is a serious limitation to Graham’s ap¬ proach: It is not always possible to liquidate a company immediately and pocket the difference between its inherent value and its low stock price. While the clock ticks away, moreover, the company may be losing money (a good reason why its stock is depressed in the first place). The outcome is a long wait for a disappointing payoff, which translates into a mediocre return on the supposed bargain purchase.68 A further problem is that al¬ though attractive “value stocks” are plentiful after a severe downturn such as U.S. stocks suffered in 1973-1974, they can be extremely hard to find in better times. In short, readers should not expect to reap billions by per¬ sonally investing in stocks on the basis of Graham’s statistical measures."
""You are neither right nor wrong because the crowd disagrees with you," Graham had taught."
"Graham and Dodd wrote, "An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return." And while there are number of things one needs to look at when evaluating or researching a potential in- vestment, Graham outlines the following six items as essential factors to look at when analyzing a business: 1. Profitability 2. Stability 3. Growth in earnings"
"Graham and Dodd wrote, "Investing, like medicine, law and economics, lies somewhere between an art and a science." The discipline that is investing is backed up by the use of security analysis to develop and present important facts regarding po- tential investments. The idea is to gather information in order to determine intrinsic value and risk characteristics of a specific se- curity."
"a private market intrinsic valuation for a Graham value investor requires that the asset generate free cash flow."
"If you cannot accept investing underperformance in the short term in order to achieve long-term investment outperformance, then you are not a candidate for Graham value investing."
"The Graham value investor’s job is to recognize mispriced assets when he or she sees them."
"Graham value investors do not spend time with top-down factors like monetary policy, consumer confidence, durable goods orders, and market sentiment in doing a business valuation or investing."
"A Graham value investor puts short-term predictions about mass psychology in the too hard pile and focuses on what he or she can do successfully with far greater ease."
"Simply put, your objective as a Graham value investor is to buy a share of stock at a sufficiently large bargain that you do not need to predict short-term price movements in the stock market."
"Graham value investing system simply: buy at a bargain defined by a margin of safety and wait."