Judging from the 149,679 results you will find on Amazon.com when you search for “investing,” the topic is an issue of great interest to the public (Amazon). At first glance, it might be surprising that a rather old book – The Intelligent Investor, first published in 1949 – tops the list for this search item. However, once you find out more about the book’s author, Benjamin Graham and his contributions to the investment community it becomes apparent that there is a reason why his book is number one: known as the “Father of Value Investing” (Reese), Graham elevated investing from a mere “hit-and-miss affair” to a real profession and influenced many of the greatest investors of the 20th century, including Warren Buffett, the world’s third-richest person according to Forbes Magazine (Carlen; “World’s Billionaires”).
Another reason why The Intelligent Investor is at the top of Amazon’s list is that Benjamin Graham wanted not only professional investors to benefit from his findings and therefore specifically wrote the book “for laymen” (Graham 1). In other words, he wanted to give people who had no prior knowledge about the stock market the “analytical tools that are essential to financial success” (Graham xi). Nevertheless, when thinking about applying his methods today, it has to be considered that his concepts date back to the 1940s and that some people do not believe in value investing anymore. Articles like “The Death Of Value Investing” have been published recently and seem like an oxymoron to the sustained success of Benjamin Graham’s book (Bachireddy). Technology is oftentimes named as the primary factor that goes against the classical value investment strategies. We live in a world where “technology has implications for nearly every aspect of society” – and that also includes investing (Zewe).
Leading the industry, BlackRock Inc., “the world’s largest asset manager, with $5.1 trillion in total assets … has started a shake-up of its stock picking business, relying more on robots rather than humans to make decisions on what to buy and sell,” possibly making the markets more efficient (Krouse).
And this is just one example of the many asset managers who have started to explore this topic lately (Shen). This paper examines the practical relevance of Benjamin Graham’s value investing approach at the present time and whether ordinary people can still apply his strategies. Drawing from Benjamin Graham’s (and his co-author’s David L. Dodd’s) own writing in the form of The Intelligent Investor and Security Analysis as well as from additional supporting sources, this paper first defines and summarizes the value investing strategy as developed by Benjamin Graham and introduces the main concepts of value investing like intrinsic value and the margin of safety. After that, this paper will inspect whether value investing is still applicable today. Next, it will be explored how regular Americans invest and whether they can benefit from implementing a more value-based approach to investing. Finally, conclusions will be drawn from the findings.
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