Is Warren Buffett's 'Value Investing' Dead?

So first of all, let's talk, what is value investing? Now, well, really when it comes down to it, I consider all investing to be value investing because at the end of the day, we're just trying to buy undervalued stocks.

I mean, that's all investors approach.

No investor goes in trying to buy overvalued stocks.

That would be insane.

So I think that all, All investing really is value investing in some element.

However, what people are usually referring to when they say value investing is really the approach that was first put down pen and paper by Ben Graham back with his book Security Analysis and then built on with The Intelligent Investor.

And that's the approach that Warren Buffett kind of learnt and then took over and kind of made his own over time.

Now, when Ben Graham first kind of put this idea of value investing down on the paper, it was very different to the kind of value investing we see Warren Buffett do today.

And Ben Graham's approach has been referred to as kind of picking the cigar butt companies.

Now, it's very, very different to what Warren Buffett does today.

So, Ben Graham, he was looking for really ridiculously cheap companies, like ridiculously really super low P ratios.

And to be honest, he didn't really even view, sometimes he didn't view companies as businesses.

He kind of viewed them more as just a collection of assets that put them together and they formed this company.

But he viewed it more in the sense of, you know, if I buy this, it's cheap enough where if the company goes bust, then it could probably be broken up and sold off in its different parts and I could still make money.

And his approach wasn't to back these cheap companies that he believed had a great business behind them and are going to perform well and grow over the next 10, 20, 30 years.

His first kind of mentality was, well, make sure it's cheap enough that if all things went wrong and it got broken up and sold off, I'd still probably come out making money.

And then what he did after that is he talked about buying a massive diversified basket of all these different companies.

Hopefully you come out with more companies that kind of rebound and regain some of their share price or regain some of their value You have more of those companies than the ones that just fail miserably and go bust now in my opinion that version of value investing That's not my cup of tea.

I think that version is pretty much dead but Then what happened is Warren Buffett came along, along with Charlie Munger and of course they've been working together for so long.

They took that kind of fundamental approach of finding undervalued businesses and they built on it.

In fact, one of the most important things that they kind of changed about it is they put a lot more emphasis on finding businesses that you think will perform well into the future and grow.

They put a lot more emphasis on the collection of assets that is the company not just being a collection of assets, but being a functioning machine that can produce cashflow and that can grow over time.

And that's really Warren Buffett's kind of thinking is that there is value in a business that goes beyond the sum total of the assets that make up the business.

And that's really the secret source of investing.

Yes, you need to always look for good prices no matter what, But overall, base your valuation on the business operations as opposed to the assets that make up the business.