August 29, 2014

Mr. Market – The Famous Value Investing Allegory

Benjamin Graham Value Investing Allegory

In his classic treatise, The Intelligent Investor, Benjamin Graham, the father of value investing, created an allegory to help new investors understand how to think about stock prices and value investing in general. By using it, you can help protect yourself from overpaying for a stock, panicking when the market crashes, or doing foolish things resulting from emotional reactions to the nightly news.  Along with the margin of safety concept, Mr. Market is a cornerstone of the value investing … [Read more...]

Margin of Safety – The Secret Value Investing Strategy

Margin of Safety Value Investing with Ben Graham

The single most important concept in all of investing, according to Benjamin Graham and later confirmed by his star student, Warren Buffett, comes down to three simple words: Margin of Safety. What is the margin of safety?  How do you calculate it?  How important is it to developing a successful value investing strategy?  As you'll see in a moment, the ultimate return you earn on your investments will likely be closely related to the size and quality of the margin of safety you build in to yo … [Read more...]

Tweedy, Browne Value Investing

Tweedy Browne The Little Book of Value Investing

For years, my family has maintained a substantial portion of our retirement accounts through Tweedy, Browne & Company, the oldest value investing firm in the world. Originally serving as stock broker to the father of value investing, Benjamin Graham, Tweedy, Browne & Company converted to a money management company and eventually launched several highly successful mutual funds that operated with the same value investing style for which they had become renowned.  After beating the ma … [Read more...]

Common Characteristics of Value Investing Stocks

Value Investing Strategy Stocks and Bonds

There are several common characteristics that often present themselves in stocks that are thought to be attractive to those who follow a value investing strategy.  These have been written about extensively by famous value investing firms such as Tweedy, Browne & Company, and even Benjamin Graham himself.  By understanding the traits that frequently manifest themselves with successful value stocks, one can better learn to spot them. The Most Common Traits Found In Value Investing St … [Read more...]

Charlie Munger Value Investing Strategy

Charlie Munger at the Berkshire Hathaway Shareholder Meeting

Charlie Munger, the Vice Chairman of Berkshire Hathaway, former hedge fund manager, and billionaire value investor, was instrumental in changing Warren Buffett's way of thinking about value investing. Charlie insisted that the investor would be better served by focusing on better quality businesses, even if the price were higher, because those businesses could be held for decades, continually churning out cash and profits for the owners. In fact, it was this influence that resulted in … [Read more...]

Bill Ruane Value Investing Strategy

In 1950, William Ruane, or Bill Ruane as he was known, took a course on value investing taught by Benjamin Graham and David Dodd at Columbia University despite having graduated from Harvard Business School.  One of his classmates was Warren Buffett, with whom he formed a friendship.  Years later, when Buffett dissolved his investment partnership, he recommended that any partners still interested in value investing put their money with Ruane, who had launched his own firm, Ruane, Cunniff.  Th … [Read more...]

Walter Schloss Value Investing Strategy

Walter Schloss, a legendary value investor who learned directly from Benjamin Graham, the father of value investing, never graduated from college and was hired as a runner on Wall Street in 1934, at the age of 18. Schloss enrolled in the New York Stock Exchange Institute, where he took courses from Benjamin Graham on how to value businesses, find value stocks, and manage money. Using the lessons he learned there, Schloss launched his own value investing fund in 1955, with a starting balance … [Read more...]

Benjamin Graham Value Investing Strategy

In addition to penning several of the most important value investing books in history, Benjamin Graham, the father of value investing, was one of the two partners in the Graham Newman Corporation, the investment fund through which he put money to work. It was at this firm that Warren Buffett worked early in his career, learning from the master.  As he amassed an astounding investing record, Graham divided his portfolio into several categories, or "operations".   These served value investing st … [Read more...]

Value Investing 101

Value Investing Strategy

Some of the greatest investors in history have been value investors including Warren Buffett, Walter Schloss, the Managing Directors of Tweedy, Browne & Company, Bill Raune, and Eddie Lampert, just to name a few.  With hundreds of billions of dollars in wealth between them, you may be tempted to look into the value investing philosophy and see if it is right for you.  Before we can do that, you need to learn what value investing is and how it is implemented into a portfolio. " An in … [Read more...]

Common Misconceptions About Dollar Cost Averaging

Dollar Cost Averaging Investing Strategy Stock Market

It is a common misconception that dollar cost averaging is merely the regular saving of money through automatic investment.  Technically, this is not dollar cost averaging, although it closely resembles it.  Instead, dollar cost averaging is the regular investing of a fixed amount of money as opposed to putting it in to the market in a lump sum.  If you were to win the lottery, receive a pension lump sum payout, or cash out of a real estate investment, dollar cost averaging would mean you park th … [Read more...]