On October 2, Columbia Business School celebrated the 75th anniversary of the publication of Benjamin Graham and David Dodd’s Security Analysis. Now in its sixth edition, Security Analysis is the seminal and definitive text on value investing.
The anniversary celebration, hosted by the Heilbrunn Center for Graham & Dodd Investing, consisted of an symposium featuring contributors to the sixth edition of Security Analysis, including David Abrams, Bruce Berkowitz, James Grant, Glenn Greenberg, Bruce Greenwald, the Robert Heilbrunn Professor of Finance and Asset Management and director of the Heilbrunn Center, Seth Klarman, Roger Lowenstein, Howard S. Marks, J. Ezra Merkin and Thomas Russo. The celebration coincided with the annual Graham and Dodd Breakfast Seminar, which was broadcast live on the Web.
The symposium consisted of three panels that focused on how the concept of value investing has evolved since the publication of Security Analysis in 1934. Though the panelists agreed that the present economic environment has presented a unique set of challenges to value investors, they affirmed that the practice’s core principles remain as relevant and effective as ever.
“Success comes through thinking about underlying economics and how that works in the market,” said Abrams, managing partner of Abrams Capital. “Anyone who understands what Graham and Dodd were about will recognize that the current environment validates that.”
Security Analysis laid the intellectual foundation for value investing, an approach to securities that identifies stocks with prices lower than their intrinsic value. Security Analysis has garnered attention for its influence on several famous investors, including Warren Buffett, MS ’51, who worked closely with Graham in his time at the School.
Several of the panel’s participants discussed the impact that Security Analysis has had on their careers. Berkowitz, founder and managing member of Fairholme Capital Management, said, “I came across [Security Analysis] and a light bulb went off. It’s all about counting the cash, the owner’s earnings, how long the business will be around. It’s about telling the truth and not being in denial — don’t guess, keep it simple. Your thesis should fit on the back of a postcard.”
The panelists differed in how they are approaching the turbulence of the current economic environment. Abrams said that his firm is actively searching for bargains. “We look for value — there’s so much cheap stuff out there right now it’s eye-popping. These are some of the best opportunities I have ever seen. I was signing trade tickets the other day and said, ‘Make me copies of these so we can remember we bought these at these prices!’ It’s exciting.”
Marks, chairman and cofounder of Oaktree Capital Management, is taking a more cautious approach. He said, “Investors have to make it through the low points. Incredible as it sounds, survival is essential to success.”