Abstract
The carnage left by the Great Crash gave rise to two visionaries, John Burr Williams and Benjamin Graham, who moved investment analysis from Investing 1.0 to Investing 2.0 by arguing that investors can estimate what stocks are really worth by considering a company’s assets, earnings, and dividends. The intrinsic value of a stock is what investors are willing to pay to receive the anticipated income from the stock—with no expectation of ever selling. There are a variety of value-investing benchmarks for assessing whether stock prices are reasonable, including the dividend yield, price/earnings ratio, earnings yield, and Shiller’s CAPE.
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References
Buffett, Warren. 2021. Berkshire Hathaway Shareholder Letter. https://www.berkshirehathaway.com/letters/2021ltr.pdf.
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Graham, Benjamin, and Dodd, David L. 1934. Security Analysis, New York: McGraw-Hill.
Williams, John Burr. 1938. The Theory of Investment Value, Cambridge, MA: Harvard University Press.
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Smith, G., Smith, M. (2023). Investing 2.0—The Birth of Value Investing. In: The Power of Modern Value Investing. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-45900-9_2
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DOI: https://doi.org/10.1007/978-3-031-45900-9_2
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