Is this securities analysis method outdated when Graham and dowd pursue "security assurance with a value far beyond the price? At present, many professors who write textbooks think so. They believe that the stock market is an efficient market. In other words, the stock price has fully reflected all the facts of the company and the overall economic situation, there is no low-price stock in the market, because smart Securities Analysts will use all existing information to ensure proper prices. It is just luck that investors can beat the market over years. "If the price fully reflects the existing information, this type of investment technique will not exist. "The author of a current textbook wrote this article.
Maybe so! However, I would like to provide a group of investors for your reference. Their long-term performance always exceeded the stock price index of stamp in 500. Their performance, even by coincidence, is at least worth review. The key fact of the review is that I have been familiar with these winners for a long time and have seen them as super investors for over 15 years. This condition is missing-in other words, if I have recently selected several names from thousands of records and provided them to you this morning-I suggest you stop reading this article immediately. I must note that all these records have been audited. I must explain that I have known many of the above-mentioned managers who have been collecting check records for years.
Before proceeding to the review, I would like to imagine a nationwide copper-throwing competition. Let us assume that 0.225 billion of the population in the United States will roll out a one-dollar copper coin when they get up tomorrow morning. When the sun rises in the morning, they all go out and throw a copper plate and guess the front or back of the copper plate. If they are right, they will win a dollar from the wrong guess. Every big part of the losers are eliminated, and bonuses are continuously accumulated. After ten times of throwing in ten mornings, about 22 thousand people in the United States have guessed the result of copper throwing for ten consecutive times. Each person earned about $1000.
Now, this group of people may start to show off their own achievements, which is due to human nature. They may remain modest, but occasionally attract the attention of the opposite sex using this technique during a cocktail party and show off the singular insights of their copper fl.
It is assumed that all the winners can get a proper bonus from the losers. After ten days, about 215 people have guessed the result of the copper coin throwing for 20 consecutive times, and each person has won a prize of about $1 million. The loser paid a total of $0.225 billion, and the winner received $0.225 billion.
At this time, this group of people may be totally addicted to their achievements: they may start to write: "How do I work 30 seconds a morning, and change-$1 million to $ within 20 days. "Worse, they will attend workshops throughout the country to promote how to effectively throw copper coins and refute skeptical professors," If this is impossible, why are there 215 of us? "
However, a professor at a business school may rudely propose the fact that, if 0.225 billion orangutan people participate in the competition, the same is true in general-215 arrogant oranguans will win 20 hits in a row.
However, I must note that there are several major differences between the aforementioned cases and the case I am about to propose. Purpose first, if (a) the distribution of the 0.225 billion orangutan you selected is roughly the same as that in the United States; if (B) after 20 days of competition, there are only 215 winners left. If (c) You find that 40 of them are from a zoo in Omaha, there will be something strange. As a result, you will ask the orangutan administrator a variety of questions about the feeds they eat, whether they perform special sports, and what books they read ...... In other words, if you find that successful cases are unusually concentrated, you want to determine whether the characteristics of this exception are the cause of success.
Scientific research also follows this pattern. If you try to analyze a rare cause of cancer-for example, there are only 1500 cases in the United States each year-and you find that a mining town in Montana produces 400 cases, then you must be interested in local drinking water, patient occupation, or other variables. You know, the occurrence of 400 cases in a small town is by no means caused by random factors. Although you may not know the cause, you know where to start the investigation.
In addition to geographic countries, there are other ways to define the origin. In addition to the origin of geography, there is also what I call the origin of intelligence ". I think you will find in the field of investment that a fraction of the Winners of copper coins are from a very small intellectual village, known as the "Graham multi-German city ". There are many winners in this particular smart village. This concentration is not a coincidence to explain.
In some cases, even unusual concentration phenomena may not matter. Perhaps 100 are just imitating a very convincing leader, and he guesses the result of the copper coin throwing based on his ideas. When he guesses positive, 100 followers automatically make the same guesses. If this leader is one of the last 215 winners, then this 100 belongs to the same intellectual origin, and this fact is meaningless, because the 100 cases actually only represent one case. Likewise, we assume that you live in a society with a very strict patriarchal structure, and every family in the United States is like a father. In 20 days, you will find that 215 winners come from 21.5 families. Several naive analysts may therefore believe that successful prediction of the results of the steel plate throwing has a high level of genetic factors. Of course, this actually doesn't make any sense, because you don't have 215 individual winners, but only 21.5 randomly distributed families.
The group of successful investors I want to consider has a common intellectual leader Benjamin Graham. However, all the children who left the intellectual family guess their own in a very different way"
Copper Plate ". They go to different places to buy and sell different stocks and companies, but their overall performance cannot be explained by random factors. They make the same guesses, not because the leader gives a command, and therefore cannot explain their performance in this way. Family knowledge only provides the intellectual theory of speculative copper. Every student must decide how to use this theory on his own.
The intellectual structure shared by investors from the Graham metropolis is that they explore the differences between the value of an enterprise and its market price. In fact, they take advantage of these differences, but do not care about the concerns of efficiency market economists: whether stocks are bought on Monday or Monday ....... When an entrepreneur buys a company-this is exactly what investors in Graham's multi-German city are engaged in through listed shares-I doubt how many people will care about transactions that must happen in a month or a week. the first day. If there is no difference between a company's purchase transaction on Monday or Friday, I cannot understand why academics spend a lot of time and effort, discuss the differences in transactions that represent part of the enterprise's equity. Needless to say, investors in the city of Graham yide do not discuss the variations of the bate, capital asset pricing model, and securities investment remuneration base. These issues are insufficient. In fact, most of them have difficulty defining the above academic terms. They only care about two real numbers: price and value.
I was always surprised at the price behavior that graphic analysts studied. Will you decide to purchase the company just because the market price of a company has been played this week or the previous week? In the era of computer technology, people have studied price and transaction volume extensively, on the grounds that these two variables have countless materials. Research may not be useful because of its function, but because of the existence of information, academics must work hard to learn the mathematical skills required to operate on such information. -Once you have these skills, you will feel guilty if you don't use them, even if they don't have any function or can only bring negative functions. As one friend said, for a hammer-holding person, everything looks like a nail.
I believe that this group of investors with a shared intellectual origins deserves our research. Although academic circles constantly research the impact of price, transaction volume, seasonality, capital scale and other variables on stock performance, this group of Value-Oriented winners is not concerned.
This performance study first dates back to four partners at greham-Newman from 1954 to 1956. We have a total of four people-I did not select these four from thousands of objects. After I took the Benjamin Graham course, I asked Graham Newman to take a non-assigned job, But Graham refused to do so with an overestimated value. He sees the value very seriously! After my constant pleading, he finally agreed to hire me. At that time, the company had three partners and four of us "apprentices ". After the company's operation, the four of us left the company one after another from 1955 to 1957. Currently, we can only track the investment records of three of them.
The first case is Walter slogs. Walter has never been to a university, but he attended a night course by Benjamin gerreum at the New York Financial Association. Walter left greham-Newman in 1955. The following is "Adam Smith"-after I talked to him about Walter-in "Super money" (1972)
His description in this book:
He never uses or has access to useful information. Almost no one knows him on Wall Street, so no one provides his idea about investment. He only refers to the numbers in the manual and asks the company to send the annual report to him.
When Walter introduced us, he once described that "he never forgot that he was managing others' funds, which further strengthened his aversion to risks. "He has a high character and holds his own attitude in a pragmatic manner. For him, money is real, and stocks are real. From then on, he accepted the "margin of security" principle.
Walter's portfolio is extremely scattered, and its current stock is far beyond 100. He understands how to stock-picking and sell sellers whose prices are much lower than their value to private investors. This is what he does. He does not worry about whether the current year is July, whether today is Monday, or whether this year is the year of the election. His idea is very simple. If a company is worth one dollar and I can buy at 40 cents, I will make a profit sooner or later. He kept moving like this: he holds far more stock types than me-And cares less about the nature of the company than I do; I don't seem to have much influence on Walter. This is his strength-no one has enough influence on him.
The second case is Tom knapu, who once worked with me at greham-Newman. Tom majored in chemistry at Princeton University before the war. After the war, he often wandered on the beach. One day, he learned that David Dowd will take a nighttime investment course at the University of Columbia. Tom took the course as an observer, and then he had a strong interest in investment, so he officially registered to the Columbia University Business School and obtained an MBA. 35 years later, I called Tom and confirmed something about the theme. I found him still wandering on the beach. But the difference is that he currently has a beach!
In 1968, Tom and Eduard andreson-a believer in gorahan-and one or two other people with a shared belief-formed the Emperor's brown partnership. The investment of the Didi brown partnership is highly dispersed. They occasionally engage in controlling equity investment, but their passive investment performance is slightly equal to the performance of a controlled investment.
Table 3 shows the investment performance records of the third employee of Graham-Newman. He founded Buffett's partnership in 1957. The smartest decision he made was to end the partnership in 1969. Since then, Berkshire Hathaway has become a continuation of the Partnership to some extent. I can't give you a single index to reasonably test the Investment Management of Berkshire. However, I believe that no matter how you test it, its performance has always been satisfactory.
Table 4 is the investment performance record of Sequoia fund manager dunluang. I met him at Graham's lecture in 1951. After graduating from Harvard Business School, he entered Wall Street. Later, he realized that he needed real business education, so he attended Graham's lecture at Columbia University, and we met in Early 1951. From 1951 to 1970. Bill manages a relatively small amount of money, but the performance is far better than the market. When I ended Buffett's partnership business, I asked bill to set up a fund company to manage the funds of our partners, so he set up Sequoia fund. The timing of his fund establishment was very unfavorable. He is faced with two levels of markets, and it is quite difficult for value-oriented investors to operate. I am very happy to mention that my partner shareholder not only entrusted him with management, but also invested more money and appreciated his performance.
This does not involve post-foresight. Bill was the only candidate I recommended to my partner, and I said at the time that if his performance could be four percentage points higher than the stoop index, it would be very stable. Bill's performance is far greater than that, and the amount of money managed is constantly expanding. This makes management more and more difficult. There is no doubt that the scale of funds is a drag on performance. This does not mean that when the scale of funds expands, your performance will not go beyond the average level, but the extent of transcendence will be reduced. If the amount you manage is $2, your performance will inevitably not go beyond the average level, because your capital scale is the total market value of the entire stock market.
I must add that, as of now, the investment portfolios we have observed do not overlap during the entire period. They all choose stocks based on the difference between price and value, and the selected targets are also completely different. China's most important shareholding is solid enterprise, such as Hudson.
Pulp & Paper, jeddo highhand coal, New York Trap rock
Companies, even those who occasionally read financial news, are familiar with the names of these companies. Didi Brown is a well-known enterprise. On the other hand, Bill's selection target is a large enterprise. These investment portfolios rarely overlap. Their record is not a speculative copper card dominated by someone, others just listen to it.
Table 5's investment results come from my friend, who graduated from Harvard Law School and founded a major law firm. I met him about 1960 and suggested that the law is a good hobby, but he should do better. As a result, he established a partnership. His operations were different from those of Walter. His portfolio was concentrated in a very small number of securities, so the performance changes were fierce, however, he is still engaged in investment based on the same value discount method. He is willing to accept performance fluctuations, and he is a very concentrated person. His name is Charlie monger. He is a long-term shareholder in partnership with me for operations at Baike Xia. When he runs his own partnership, his portfolio is totally different from that of me or anyone previously mentioned.
Table 6's investment is a good friend of Charlie, another non-commercial student, who graduated from the department of mathematics at the University of Southern California. After graduation, he entered IBM and once worked as a salesman. After I caught Charlie, Charlie caught him again. His name is Rick Jilin. From 316% to 22200%] in, the stoop index's compound interest growth rate was, while Rick's performance was. This may be because he lacks the background of business education and he can be seen as statistically significant.
Theme aside: Buy a dollar bill at 40 cents. People will never accept it if they cannot accept it immediately. It is like an injection agent. If it cannot immediately catch this person, I think that even if you convince him for a long time and show various records, you cannot accept him. This is a simple concept, but they cannot comprehend it. A person like Rick has no background in formal business education, but can immediately understand the value investment law and use it five minutes later. I have never seen anyone before, and will gradually convert to this method after 10 years. It seems to have nothing to do with IQ or academic training. It is an epiphany, or it is a rejection.
Table 7 is Stan polmita (Stan
Perlmeter. He graduated from the department of art at the University of Michigan and is a shareholder in bozell & jacbs advertising -. Our office is located in the same building in Omaha. In 1965, he thought that my business was better than his industry, so he left the advertising industry. Once again, Shi accepted the value investment law within five minutes.
Shi's stock is different from Walter's. His stock is also different from Bill's. They are all independent records. But when stoop buys every stock, it is because the value he gets is higher than the price he pays. This is his only consideration. He does not refer to the earnings estimates for each quarter, nor to the earnings estimates for next year. He does not care about the day of the week or any investment research report, he ignores Price Momentum and transaction volume variables. He asked only one question: How much is the enterprise's value?
The investment performance records in table 8 and table 9 belong to the two retired funds I participated in. They are not selected from the more than a dozen retired funds I participated in, he is the only two retired funds that I can influence my investment decisions. Among these two funds, I have guided them to become value-oriented investment managers. Only a few of Hu's funds are managed based on value. Table 8 is the retirement fund (
Washington Post Company's pension
Fund. A few years ago, they commissioned a large bank to manage funds. Later, I suggested that they hire value-oriented fund managers to improve investment performance.
As you can see in the investment records, their overall investment performance has always ranked top among all funds since they changed their fund managers. The Washington Post asked fund managers to maintain at least 25
%
The Fund is invested in bonds, and bonds may not be the investment choice of fund managers. Therefore, I also include their bond investment performance in the table, and the data shows that they do not actually have any special bond skills, and they have never boasted about themselves like this, although 25% of the funds invested in the bond sector they are not good at, dragging their investment performance down, their fund management performance level still ranks among the top one hundred. The investment in the Washington Post Retirement Fund, despite not having gone through a long period of market downturn, is sufficient to prove that many of the investment decisions made by the three fund managers are far from the future.
Table 9's investment performance belongs to the FMC retirement fund. I did not manage the Fund for a penny, but I did influence their decision-making in 1974, persuade them to choose value-oriented fund managers. Before that, they chose fund managers in the same way as other large enterprises. After they switched to the value investment strategy, their investment performance is currently in the Baker Retirement Fund Survey Report (
Becker survey of pension
Among them, funds ranks first, surpassing other funds of the same size. In 1983, the Fund had a total of eight fund managers who had been working for more than one year, of which seven had accumulated investment performance exceeding the Standard & Poor's index. During this period, the difference between the actual performance of the FMC fund and the net return of the average performance of the Fund was $0.243 billion, which FMC attributed to their distinctive option options for fund managers, these fund managers may not be my preferred choice, but they all share a common feature, that is, choosing stocks based on value.
All of the above nine investment performance records come from the "copper c Er" of "Graham multi-German city". I selected them many years ago based on their investment decision-making architecture. I understand the training they have received and their wisdom, personality, and temper. We must understand that this group of people only bear the risk below the average level; pay attention to their records during the poor stock market. Although their investment styles are quite different, they always stick to the same mentality: the goal of buying is the enterprise, not the enterprise's stock. Some of them occasionally buy the entire enterprise, but they often only buy a small portion of the enterprise. Whether buying an enterprise as a whole or a part of the company, they share the same attitude. In a portfolio, some people hold dozens of shares, while others concentrate on a few shares. However, everyone is benefiting from the difference between the company's market price and its contained value.
I believe there are many inefficiency in the market. These investors from the Graham metropolis have successfully grasped the gap between price and value. The "masses" of Wall Street can influence the stock price. When the most emotional people, the greedy or frustrated people drive the stock price, it is hard to argue that the market price is the product of rationality. In fact, the market is often unreasonable.
I would like to propose an important relationship between compensation and risk. In some cases, there is a positive relationship between compensation and risk. If someone tells me that "I have a six-shot left wheel gun and a bullet filled in. You can drag the wheel at will and trigger the trigger at yourself. If you can survive, I will reward you with $1 million. "I will reject this proposal-maybe my reason is that $1 million is too small. Then he may suggest raising the bonus to $5 million, but he has to trigger the trigger twice-this is a positive relationship between compensation and risk.
In the value investment law, the opposite is true. If you buy a dollar bill at 60 cents, the risk is higher than 40 cents, but the latter has a high reward expectation. Value-oriented investment portfolios have a higher reward potential and a lower risk.
For example, in 1973, the total market value of the Washington Post Company was USD 8 million. On this day, you can sell your assets to one of ten buyers at a price not less than $0.4 billion or even higher. The company owns the Washington Post, business weekly, and several important TV stations. The current value of these assets is $0.4 billion, so buyers willing to pay $0.4 billion are not crazy.
Now, if the share price continues to fall, the company's market value has fallen from USD 8 million to USD 4 million, and its bate value has also increased. For people who use the bate value to measure risks, a lower price makes it more risky. This is Alice in Wonderland. I can never understand that the risk is even higher if I use $0.4 billion instead of $ to buy assets worth $. In fact, if you buy a bunch of such securities and have a little understanding of the so-called enterprise comments, you can buy $0.4 billion in assets at a price of $8 million. This transaction is basically no risk, in particular, they bought 10 types of value 8 million at a price of $4000 respectively.
If your assets are tens of thousands of dollars, the risk is lower. Because you don't have $0.4 billion, it's not difficult to find honest and competent people.
In addition, you must have knowledge and be able to roughly estimate the value of an enterprise. However, you do not need accurate evaluation knowledge. This is the so-called margin of security by Benjamin gerlaum. You don't have to try to buy a company worth $80 million at a price of $83 million. You must keep yourself quite buffered. When you build a bridge, you stick to the load of 30 thousand lbs, but you are only allowed to shuttle between 10 thousand lbs of trucks. The same principle applies to the investment field.
Some business-minded people may doubt my motivation to write this article: More conversion to value investment will narrow the gap between value and price. I can only tell you that this secret has been circulating for 50 years since Benjamin Graham and David Dowd published securities analysis. During my 35 years of pursuing this investment theory, I have never seen the value investment law become a breeze. There seems to be a paranoid nature in people's nature, and they like to make simple things more complicated. In the past 30 years, academic circles have completely deviated from the lessons of value investment. It is likely to continue. Ships will travel around the Earth. However, you can still see it without interruption. In the market, there will still be a wide gap between price and value, and people pursuing Graham and the theory of Dov will also flourish.
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