Among the many speeches the sage of Omaha, Warren Buffett, has delivered over the years, his most significant speech is ‘The Superinvestors of Graham and Doddsville’, delivered to the students of Columbia Business School, in 1984, at a seminar marking the 50th anniversary of the publication of Benjamin Graham and David Dodd’s all-time classic Security Analysis.
Warren Buffett was a student of Graham and has over the years remained committed to the philosophy of ‘value investing’ put forward by Graham.
In that 1984 speech, Buffett said, “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 the market.”
The stock markets are not efficient, i.e. the price of a stock does not reflect everything that is known about a company or the economy. Given this, there are stocks which sell at a price less than what they deserve.
So, the only thing a value investor is bothered about is the worth of the business. “He’s not looking at quarterly earnings projections, he’s not looking at next year’s earnings, he’s not thinking about what day of the week it is, he doesn’t care what investment research from any place says, he’s not interested in price momentum, volume or anything.
He’s simply asking: What is the business worth?” said Buffett. “While they differ greatly in style, these investors are, mentally, always buying the business, not buying the stock.” Understandably, the time of entry into a stock is not important for a value investor.
“He doesn’t worry about whether it’s January, he doesn’t worry about whether it’s Monday, he doesn’t worry about whether it’s an election year. He simply says, if a business is worth a dollar and I can buy it for 40 cents, something good may happen to me,” said Buffett.
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