A plaque remaining from the Big Apple Night Club at West 135th Street and Seventh Avenue in Harlem.

Above, a 1934 plaque from the Big Apple Night Club at West 135th Street and Seventh Avenue in Harlem. Discarded as trash in 2006.

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Entry from February 12, 2014
Value Investing (Value Investor)

"Value investing” is the investment theory where a “value investor” seeks to buy a security that is undervalued at its current market price. Benjamin Graham (1894-1976) and David Dodd (1895-1988) were instructors at New York’s Columbia Business School and are often called the fathers of value investing because of their book, Security Analysis (1934)—although the term “value investing” does not appear there.

The term “basic value investing” became popular in the 1970s and early 1980s. Gold and Black Gold: Basic Value Investing for the New Economic Era by Leslie Snyder was published in 1974. “"I think we have an opportunistic market going that will reward the value investor with a bit of imagination” was cited in print in 1976 and “We’re basic value investors” was cited in 1977. “Sequoia follows the ‘Ben Graham’ theory of basic value investing” was cited in print in 1981. The term “basic” was later dropped.


Wikipedia: Value investing
Value investing is an investment paradigm that derives from the ideas on investment that Ben Graham and David Dodd began teaching at Columbia Business School in 1928 and subsequently developed in their 1934 text Security Analysis. Although value investing has taken many forms since its inception, it generally involves buying securities that appear under priced by some form of fundamental analysis. As examples, such securities may be stock in public companies that trade at discounts to book value or tangible book value, have high dividend yields, have low price-to-earning multiples or have low price-to-book ratios.

High-profile proponents of value investing, including Berkshire Hathaway chairman Warren Buffett, have argued that the essence of value investing is buying stocks at less than their intrinsic value. The discount of the market price to the intrinsic value is what Benjamin Graham called the “margin of safety”. The intrinsic value is the discounted value of all future distributions. However, the future distributions and the appropriate discount rate can only be assumptions. Graham never recommended using future numbers, only past ones). For the last 25 years, Warren Buffett has taken the value investing concept even further with a focus on “finding an outstanding company at a sensible price” rather than generic companies at a bargain price.

Graham never used the phrase, “value investing” — the term was coined later to help describe his ideas and has resulted in significant misinterpretation of his principles, the foremost being that Graham simply recommended cheap stocks.

Wikipedia: Benjamin Graham
Benjamin Graham (/ɡræm/; May 8, 1894 – September 21, 1976) was a British-born American professional investor. Graham is considered the father of value investing, an investment approach he began teaching at Columbia Business School in 1928 and subsequently refined with David Dodd through various editions of their famous book Security Analysis.

Wikipedia: David Dodd
David LeFevre Dodd (August 23, 1895 – September 18, 1988) was an American educator, financial analyst, author, economist, professional investor, and in his student years, a protégé of, and as a postgraduate, close colleague of Benjamin Graham at Columbia Business School.

The Wall Street Crash of 1929 (Black Thursday) almost wiped out Graham, who had started teaching the year before at his alma mater, Columbia. The crash inspired Graham to search for a more conservative, safer way to invest. Graham agreed to teach with the stipulation that someone take notes. Dodd, then a young instructor at Columbia, volunteered. Those transcriptions served as the basis for a 1934 book Security Analysis, which galvanized the concept of value investing. It is the longest running investment text ever published.

5 August 1959, San Diego (CA) Union, pg. B4, col. 3 ad:
STOCKS
FREE LECTURE
Introduction to
“COMPARATIVE VALUE INVESTING”
(...)
PALO ALTO RESEARCH

OCLC WorldCat record
Gold and black gold : basic value investing for the new economic era
Author: Leslie Snyder
Publisher: Hicksville, N.Y. : Exposition Press, ©1974.
Series: An Exposition-banner book
Edition/Format: Book : English : 1st ed

Google Books
2 August 1976, New York magazine, “The Bottom Line” by Dan Dorfman, pg. 10, col. 1:
“I think we have an opportunistic market going that will reward the value investor with a bit of imagination. And I believe it’s still a good time to buy.”
(Spoken by John B. Neff, “a well-respected value-player in equities.”—ed.)

Google Books
Forbes
Volume 119, Issues 1-6
1977
Pg. 139:
“We’re basic value investors,” says Carret, who looks for medium- to small-sized companies that he feels are undervalued and have good prospects for growth.

13 April 1981, Omaha (NE) World-Herald, “Successful Investing” by David R. Sargent, pg. 17, col. 7:
Sequoia Fund is a no-load stock fund which posted plus 287 percent for 1971-1980 and has turned in an excellent performance so far this year.

Sequoia follows the “Ben Graham” theory of basic value investing. Ben Graham, sometimes called the father of security analysis, developed a successful method for selecting stocks according to certain criteria. Stocks should sell low on earnings and under book value and should provide good yields.

1 September 1981, The Progress (Clearfield, PA), pg. 5, col. 1 ad:
“BASIC VALUE”
American General Comstock Fund, Inc. seeks capital appreciation by investing primarily in “basic value” stocks—those companies which have:
1. A low price/earning ratio
2. A strong financial statement
3. Value not currently recognized by the market.
Find out more about “basic value” investing and AG Comstock Fund’s past performance record by sending in the coupon below.

6 March 1984, Dallas (TX) Morning News, “Key indicator predicts gains on Wall Street” by Brendan Boyd, pg. 15D, col. 1:
“We’re value investors,” said Pennsylvania Mutual’s Thomas Enright, explaining his fund’s 36.2 percent rise last year and 362 percent overall appreciation since 1977. “Value investors look for discrepancies between what a corporate acquirer would pay for a company and what the stock market says it’s worth. We make no predictions. We have no opinions. We’re very dull. Our portfolio’s full of dumpy little companies nobody loves.”

OCLC WorldCat record
Value investing today
Author: Charles H Brandes
Publisher: Homewood, Ill. : Dow Jones-Irwin, ©1989.
Edition/Format: eBook : Document : English

OCLC WorldCat record
The intelligent investor : the classic text on value investing
Author: Benjamin Graham
Publisher: New York : HarperBusiness, 2005.
Edition/Format: Book : English

Posted by Barry Popik
New York CityBanking/Finance/Insurance • Wednesday, February 12, 2014 • Permalink