BEN GRAHAM’S VALUE APPROACH: CAN IT STILL WORK?

Martin Fridson

Price collapses in dotcoms and telecoms have fostered a comeback in the fundamental analysis identified with Benjamin Graham (1894–1976). Defining Graham’s method is no simple task, however; his thinking evolved considerably over a 60 year career. Reducing Graham’s approach to a quantitative formula does not produce superior performance. His most celebrated pupil, Warren Buffett, freely acknowledges buying entirely different stocks than Graham would. Graham’s notion of paying less than breakup value remains a useful pricing concept. Investors must do hard analytical work, however, to separate the nuggets from the worthless overburden.