Graham And Doddsville

The Value Investing Capital of the World

Archive for December, 2012

The Value Gene – Buffett, Klarman and Evolution

December 11, 2012 By: webmaster Category: Behavioral Finance, Benjamin Graham, Security Analysis, Seth Klarman, SuperInvestors, Understanding Value, Warren Buffett

On November 1, 2011, Charlie Rose interviewed Superinvestor Seth Klarman for the Facing History and Ourselves New York Benefit Dinner.  If you have not seen this interview, it is fantastic.

One of my favorite nuggets is the following (see 25:30):

Warren evolved through 3 stages:  He went from buying cigar butts and getting the last few puffs for free, to buying great businesses at really cheap prices, to buying and holding great businesses at so-so prices.  And maybe even this new area of buying weird securities from crappy businesses at better than market prices – like B of A preferred or whatever… I’m still in phase one.  We’re still buying cigar butts, there’s a good business there in buying them and it’s a lot of fun.
Another quote, which really struck a chord (see 22:20):
I think Warren captured the idea himself in his 1964 (sic) article The Superinvestors of Graham and Doddsville and in it he talks about – value investing is like an innoculation – you either get it right away, or you never get it.  And I think it’s just true.  I actually think there’s just a gene for this stuff.  Whether it’s a value investing gene or a contrarian gene.
It seems that researchers are beginning to confirm Klarman’s statement.  This morning, MarketWatch published an article titled The missing link of investing: Science may explain why we trade.

When asked why we trade, many of us would answer with traditional, rational responses. We see an undervalued company. We like a business, a brand or a strategy. Or, it’s the flip side: We’re selling because we may think the fundamentals point to trouble. We see an investment that looks overvalued.

As we know, most people follow the herd.  But what about contrarian investors – the ones featured on this blog – who consistently move against the herd?

It’s what the academics describe as a relatively new intersection of financial economics, psychology, and evolutionary biology including new interpretations of mutation. And the upshot, to me at least, is that we may not be as deliberative as we might think when it comes to trading decisions. In other words, we’re wired to trade a certain way.

According to Andrew Lo of MIT and Thomas J. Brennan of Northwestern claim that science evolution may explain both the herd mentality and also a contrarian one.

In other words, many of us are bound to the pack. A minority of us break away from it.

Both behaviors are necessary from an evolutionary standpoint because they’re necessary for the species to survive.  Every species needs its normal populations and its mutants.

I think I was just called a “mutant.”  I guess if that puts anywhere near the same group as Warren Buffett and Seth Klarman, then I am proud to be a mutant.

Click here to read the entire article The missing link of investing: Science may explain why we trade at

Click here to see An Interview with Seth Klarman and Charlie Rose.

Click here to learn more about Seth Klarman.

Bruce Greenwald on The Great Recession: Structural and Cyclical Causes

December 10, 2012 By: webmaster Category: Bruce Greenwald

H/T to csinvesting. is a great place to learn from/about successful value investors, but if you want to learn how to be a successful value investor, I highly recommend adding to your daily reading list.

Click here for the video.

If you haven’t read Professor Greenwald’s book Competition Demystified: A Radically Simplified Approach to Business Strategy do yourself a favor and get it for the holidays.

For more on Professor Bruce Greenwald, click here.

Michael Mauboussin on WealthTrack

December 08, 2012 By: webmaster Category: Howard Marks, Michael Mauboussin

Aside from the obvious Buffett & Munger, there are two investors I can never seem to get enough of. The first is Howard Marks – who thankfully puts out his regular memos from Oaktree. The second is Legg Mason Strategist and Columbia Business School Professor Michael Mauboussin who was recently interviewed on Consuelo Mack’s WealthTrack.


If you can’t see the video click here.

Read Professor Mauboussin’s new book The Success Equation:Untangling Skill and Luck in Business, Sports, and Investing which was recently released.

How Do I Pitch an Idea That Actually Gets Heard?

December 04, 2012 By: webmaster Category: Personal Comments, Security Analysis

One of my favorite websites that has nothing to do with investing is Lifehacker.

Lifehacker is full of tips on how to improve productivity – many of which can be applied to the research process.  Most of the analysts I know (and this one in particular) are challenged with trying to figure out how to allocate their time in the most efficient and productive manner possible.  (One warning – spending too much time reading Lifehacker may not be the most effective use of your time.)

That said, Lifehacker just posted a fantastic article.  I receive many e-mails from aspiring analysts.  One suggestion I offer (and one that I used myself) is to write compelling, concise stock pitches and send them to anyone you want to work for and anyone who is connected to anyone you want to work for.

But how do you write a compelling, concise stock pitch?  How do you pitch an idea that actually gets heard?  Lifehacker gives some great pointers here.

Dear Lifehacker,

I have good, sometimes great ideas from time to time but I don’t really know how to get anyone to listen. Usually I start and I can see there attention fade away after a few minutes. I don’t know what I’m doing wrong, or how to keep people interested. What can I do to make my pitches more interesting and get people to actually listen to them?

Pitch Imperfect

See: How Do I Pitch An Idea that Actually Gets Heard? via

Bruce Greenwald and Jean-Marie Eveillard Videos

December 01, 2012 By: webmaster Category: Bruce Greenwald, Columbia Business School, Jean-Marie Eveillard

I just watched 2 great videos. First, Columbia Business School Professor Bruce Greenwald participated in a seminar titled “Financial Innovation: A Risky Business?” which took place on September 7, 2012 at the Columbia University School of Journalism.


The second video is an interview of SuperInvestor Jean-Marie Eveillard posted by our friends at  Jean-Marie Eveillard is among the investors that I most admire.  Click here to watch the interview.

For more on Bruce Greenwald click here.

For more on Jean-Marie Eveillard see here, here, and here.