Value Investing isn’t a new concept in the world of investing. I’m guessing people have always been look for value when they buy something. But what I’m talking about, analyzing securities, stocks, ownership in a business, in a way that looks to see if that security is undervalued, is something that two very famous investors started to truly consider back in the early 30′s.
For those of you who don’t know, I’m talking about Benjamin Graham and David Dodd. These two are what some might call the fathers of value investing as we know it today. Their book in 1934 titled, Securities Analysis, is the book that brought the value investing approach to investments into the forefront and sparked careers for people like Warren Buffet. Warren learned directly from Ben Graham.
Benjamin Graham and David Dodd made terms like “intrinsic value” and “margin of safety” fun. These two terms ensure a value investor that he or she will be buying an undervalued security. Their methods, unlike trading, teach investors to buy stocks that for one reason or another are undervalued. They taught that even though a company may be getting pounded by the investment world, it can still be a good buy, just based on the intrinsic value of the company.
Benjamin Graham went on to write another book that provides value investors with one of the best resources on the subject ever written in The Intelligent Investor. A book that gives investors easy to follow rules for finding value in the stock market.
These two investors helped pave the way for value investing and in a market where day trading, options trading, buying and selling on any old blog or news article is the norm, their theories still hold water in any conversation. After the blog storm has settled, everyone will always look to what the actual value of the stock is.