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  • Writer's pictureIshfaaq Peerally

The SUPERINVESTORS of Graham-and-Doddsville - WARREN BUFFETT's 1984 Value investing article ๐Ÿ“œ

The markets $SPX500 are up today by about 0.5% with $OIL prices up by over 3%. The two oil stocks in our portfolio is doing great with $CXO up by over 3% and $PE by over 2%. GameStop $GME also up by over 3.5%. The only stock in our portfolio doing poorly is $DGE.L down by 1.2% with the $GBPUSD up. I wrote an article yesterday about the coming UK general elections and how this will affect the economy and markets. The link is down below.

The SUPERINVESTORS of Graham-and-Doddsville - WARREN BUFFETT's 1984 Value investing article ๐Ÿ“œ

In 1984, Warren Buffett wrote an article for the Columbia Business School Magazine about value investing. There are hundreds of textbooks on the subject but none can summarize value investing better than this 15 page article. Warren Buffett explains what is value investing and gives different examples. Value investing is more than just buying boring companies such as Coca Cola $KO or American Express $AXP

Warren Buffett talks against the Efficient Market Hypothesis. The Efficient Market Hypothesis says that everybody has the same information about a particular company. Therefore, the price is equal to the intrinsic value of the company and you cannot beat the market. Well, Warren Buffett has been beating the market. In fact, other investors have been beating the market investing with different styles in different companies but all having the same teachers, Benjamin Graham and David Dodd and using the same theory, Value Investing.

Warren Buffett gives the definition of value investing in the article(I suggest that you read it - after watching this video, of course). Value investing is about finding discrepancies between price and value. It is about buying a dollar for forty cents. It is about buying businesses and not just a number on a computer screen.

The first value investor Warren Buffett talks about is Walter Schloss who invested in hundreds of companies at a time and was interested in the numbers more than the actual businesses.

Tom Knapp, another value investor, started as a chemistry major before becoming an investor. He was homeless and living on a beach. Now, he owns the beach.

Bill Ruane's strategy was to invest only in small companies and keep his fund small.

Charlie Munger, vice chairman of Berkshire Hathaway $BRK.B , invested in only 10 companies at a time. His portfolio was very volatile but he also beat the market.

You don't need to be a genius to beat the market and be a great value investor. You only need to know how to buy dollar bills for forty cents. Right now, we are in a bull market and it is easy to beat the market. You just need to invest in the FAANG stocks $FB $AAPL $AMZN $NFLX and $GOOG and you'll do great but wait for the bear market, then we will see who was swimming naked.

Warren Buffett also gives examples of value investors who invested 25% of their portfolio in bonds but still managed to beat the market.

The question any value investor should ask is not how much will be EPS next quarter but What is the business worth?

Watch the full video on YouTube:

You can read my latest article about the coming UK general elections here:

Join my private investing group on Facebook for more:

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