"Graham's number" for valuing stocks (buffet mentor)

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joe sod

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I read a very good aricle on valuing stocks based on benjamin graham's idea (he was warren buffets mentor), you can read it here
[broken link removed]
 
Thanks for the excellent link. I think the skill element is mentioned at the bottom - if you find a company which you can buy at a discount, you still need to make a judgement call as to why this is so.

But it's a beautifully concise introduction to the world of value investing for the amateur investor.
 
I strongly suggest that you actually read Benjamin Graham's book 'Intelligent Investor' before you start following advise from the link you posted. While the article does identify one thing Graham lists as important in investment decisions (lower market cap than net assets), it falls far, far, far short of Graham's advice given in 'Intelligent Invester'.
It completely ignores the most important aspect of estimating future earnings and discounting them to present values. This is not a simple process, and Graham himself wrote that it should only be perfromed by qualified 'agressive investors'.
I think that article can be summed up as follows: "To every complex problem, there is always a short, simple, but completely wrong solution."
 
There's an article here on how Buffett himself has deviated from Graham's number when you look at the numbers for Kraft Foods. It's suggested in the piece that this is because the numbers are far more widely and immediately available.
 
Buffet had a second mentor, Philip Fisher, one of the fathers of growth investing. He also had a huge impact on Warren.
 
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