MICHEL PIREU: Superinvestors make the case for value investing, but times have changed
Warren Buffett thoroughly rejected the academic view that the stock market is efficient, but value investors sometimes have a long wait for success
In 1984, Hermes, the Columbia Business School magazine, published an article by Warren Buffett titled “The Superinvestors of Graham-and-Doddsville”. The piece was based on a speech he gave at the school to mark the 50th anniversary of the publication of Benjamin Graham and David Dodd’s Security Analysis, and opened with the question: is the Graham and Dodd “look for values with a significant margin of safety relative to prices” approach to security analysis out of date? What followed was Buffett’s rejection of the academic view that the stock market is efficient – that stock prices reflect everything that is known about a company’s prospects and about the state of the economy – and that, therefore, there are no undervalued stocks. “Well, maybe,” wrote Buffett. “But I want to present to you a group of investors who have, year in and year out, beaten the Standard & Poor’s 500 stock index. The hypothesis that they do this by pure chance is at least worth examining … In this group of su...
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