We had the great pleasure of speaking with Professor Bruce N. Greenwald, Founding Director of the Heilbrunn Center for Graham and Dodd Investing at Columbia Business School, about the outlook for value-oriented investing and the newly published second edition of his investment classic, Value Investing: From Graham to Buffett and Beyond.
The second edition comes two decades after the first, with each edition coinciding almost perfectly with a market boom in Internet stocks. Whether the publication of the second edition is a contrarian signal remains to be seen.
Professor Greenwald’s comments in this conversation may surprise some listeners, as his thoughts on the evolution of value investing emphasize how it needs to change in order to remain relevant and successful in the future.
Listen to the conversation (recorded on November 24, 2020):
About the author:
Bruce C. Greenwald was Founding Director of the Heilbrunn Center for Graham and Dodd Investing at Columbia Business School from 2001 until his retirement in 2019. In addition to training thousands of students in the mysteries of value investing, he taught oversubscribed courses on the economics of business strategy and globalization. His book Competition Demystified, published in 2005, is still in print. He has also been Chairman of Paradigm Capital Management since its founding in 2007 and the Director of Research at First Eagle Funds from 2007-11, serving as a senior advisor since.
About the second edition:
The first edition of Value Investing: From Graham to Buffett and Beyond was published in 2001. It is still in print, having sold over 100,000 copies. It has been translated into five languages. Business school professors still assign it in their courses. But in the 20 years since the first edition, the economy has changed, the investment world has evolved, and the discipline of value investing has adapted to this new environment. This second edition responds to these developments. It extends and refines an approach to investing that began with Benjamin Graham and David Dodd during the Great Depression and was adapted by Warren Buffett, Charlie Munger, and others to earn returns in an environment in which the opportunity to buy a stock worth a dollar for 50 cents is no longer waiting in plain sight.
The foundation of this book is the course on value investing that Bruce Greenwald taught at Columbia Business School for almost a quarter century. His aim in the course, and our aim in the book, is to help the investor operating in the Graham and Dodd tradition find him or herself on the right side of the trade. The steps include searching for the right securities, valuing them appropriately, honing a research strategy to devote time to the right activities, and wrapping it all within a risk management practice that protects the investor from permanent loss of capital.
The book has been revised throughout, but the biggest change is the addition of more than two chapters on the valuation of growth stocks, which has always been a problem for investors trained in the Graham and Dodd tradition.
Successful value investing practitioners have graced both the course and this book with presentations describing what they really do when they are at work. There are brief descriptions of their practices within, and video presentations available on the website that accompanies this volume.
In addition to a selection of Warren Buffett’s letters, there are presentations by Mario Gabelli, Glenn Greenberg, Paul Hilal, Jan Hummel, Seth Klarman, Michael Price, Thomas Russo, and Andrew Weiss. Although their styles vary, they all are members in good standing of the Graham and Dodd tradition.
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