Graham and Dodd: A Perspective on Its Past, Present, and Possible Future

Abstract

Value investing generates a great deal of attention from the practitioner community; however, no one has formally categorized the development of this influential school of thought over time. The consequences of this extend beyond the obvious losses to financial history, to a lack of perspective on what the school’s future developments could entail. Those developments could be significant to the investment community given the level of success many value investors have achieved in both traditional and alternative forms of investment. To facilitate inquiry in this area, this article categorizes historical and modern eras of value investing and presents thoughts on what a post-modern era could hold. Two potential developments are discussed: The first extends value investing concepts to corporate management, which could result in a level of financial asset allocation expertise not frequently demonstrated by corporate managers. The second potential development involves integrating insights derived from bottom-up fundamental analysis with those of complexity theory to inform margin-of-safety analysis.

TOPICS: Fundamental equity analysis, legal and regulatory issues for structured finance, legal/regulatory/public policy