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Back to the Future Investing

Source: Wall Street Journal

Apr 15, 2009

Summary

Who would have thought that a Depression-era investing style could be in vogue in 2009? But a growing group of investors are digging out their old textbooks and taking refresher courses in valuing companies based on margin of safety, current asset value and a slew of other concepts perfected 75 years ago. The market’s crash, while devastating to many people’s net worth, has created the types of bargains that drew many pros to investing in the first place—good businesses that can survive the crisis but are trading as if they’re dead. The recent rally hasn’t changed that.

These retro ideas are mostly attributed to legendary investor Benjamin Graham. After taking a beating in the 1929 stock market crash and again in 1932, Graham wanted to tweak his investing style to make money over the long run while taking a lot less risk. Graham, with the help of coauthor David Dodd, wrote down their principles in the 1934 book Security Analysis, a tome now considered a stock-picking bible by many investors, including Warren Buffett, who studied under Graham. The duo’s theorie

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