In the previous article, we learned briefly about Graham's investment strategies that every investor must learn.
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According to Warren Buffett, he learned from Graham that investing is actually not complicated at all. Ordinary people can learn, and these strategies does not require a high IQ, nor does it require a high level of understanding of mathematics or economics, it doesn’t require a high degree.
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He says that people with high IQs don't necessarily beat those with low IQs, and advanced math/economics doesn't really work in investing, you really only need to know elementary school math to proceed.
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For a true investor, it is enough to master the most basic theories and principles. He summarized the following three basic strategies in Graham's value investment strategy:

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Look at the company, not the stock.

What is the most important and fundamental attitude? Warren Buffett says, "Investing in stocks with the same attitude that you would use to run a company is the wisest approach." 

This is also a famous quote from Graham. Let's say that when people decide to buy a house, the stock is the title of the house, which represents our ownership rights. Therefore, the most important thing is not just the ownership rights, but the house itself. Similarly, a stock is only proof of ownership in a company, and the real value lies in the company behind the stock. 

Stocks cannot make money, only the company can. We can only get returns from stocks when the company makes money. Regardless of the company, there is a company first, and then there is a stock. Investing in a stock is essentially investing in the underlying company, and the future value of the company will determine the future value of the stock. Therefore, the short-term fluctuations of "Mr. Market" will not affect the long-term value of the stock.

Before investing, we should focus on analyzing the company itself, instead of just looking at market news and stock prices. We should act as analysts for the company, as our future profits ultimately depend on the company's profitability and development. This is also what Graham taught Buffett, allowing him to focus on reading detailed company information, including financial statements and business information, to determine whether there is investment value.

Look at the value, not the price

To determine if a company has investment value, it is important to accurately estimate its intrinsic value. 

This is the second most important investment principle. How can we determine the intrinsic value of a company? Buffett isolates himself from the stock market and ignores the stock price, so as not to be influenced by short-term fluctuations. Instead, he remains calm and uses detailed and comprehensive data analysis to estimate the current and future value of the company. 

As Graham teaches, only by truly understanding the intrinsic value of a company can we determine the price and judge its worth. Buffett was once fascinated by technical analysis and tried to use it to predict future stock prices. However, he found that short-term stock prices are unpredictable, but long-term prices can be predicted. Therefore, he is willing to take a longer-term approach and use solid research to confirm the company's long-term value, because the stock price will eventually return to its true value.

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Investment, not speculation

Buffett once said, "Use the market, don't let the market use you." Speculators often only make short-term gains and end up being used by the market. To beat the market, investors must rely on fundamental analysis to fully understand a company, accurately estimate its value, and hold it for the long-term. This is because speculators are often led by the market, while only investors have the potential to beat it. Buying and selling based solely on stock prices is speculation, which cannot lead to long-term profits. True investment involves careful analysis and research to preserve capital and achieve long-term returns. This is Graham's investment definition.

By following this approach, investors can discover undervalued stocks and find good entry opportunities. Graham and Buffett both experienced the economic depression of 1929, so they believe that the best way to evaluate a company's health is through detailed analysis of its financial statements, which confirms its growth potential. Graham was very cautious, while Buffett's characteristic was a high degree of trust, delegating authority to top management. This approach became the core of Buffett's investment strategy, "buying good stocks at low prices and holding them for decades." Holding these stocks for decades was the key factor that made him the "Oracle of Omaha". Here, we can see that Buffett not only inherited Graham's wisdom but also surpassed it.

We hope you enjoyed learning about the three fundamental strategies of Graham's investment philosophy. 

In the next article, we will continue to learn from Buffett's encounter with CEICO, an insurance company, which sparked a new learning opportunity. Stay tuned!

Learning from other people’s experiences is key.  Although we might not exactly be able to tap Warren Buffett or Benjamin Graham directly for mentorship, there are communities available that are willing to help out both rookie and tenured investors.
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