Mac Murray

The Intelligent Investor

In DEEP Investing on January 1, 2011 at 1:15 AM
Benjamin Graham

Benjamin Graham

Chinese Blue Marble Half Slice

“Smart investors look to the market not as a guide for what to do but as a creator of opportunity.”

–Benjamin Graham

Chinese Blue Marble Half Slice

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We all like the idea of being intelligent investors, don’t we?  Some of our more seasoned readers however may have picked up on my allusion to Benjamin Graham’s landmark work:  The Intelligent Investor.

Although I’m not a Value Investor per se, I have great respect for Benjamin Graham, as I do for all of the 20th century’s great investors.  Graham, the late teacher and mentor of Warren Buffet,  is renown as the father of security analysis and value investing.  His classics Security Analysis and The Intelligent Investor are the definitive texts of value investing.

Chinese Blue Marble 4 Dots

Beginning in 2009, I’ve had the privilege of teaching a seminar at the Philippine Stock Exchange entitled Trend Following: Technical Trading for the Intelligent Investor.  Astute attendees  often wonder aloud about my marriage of technical trading with value investing. After all, it’s a rare thing to hear value investing and technical analysis mentioned within shouting distance of one another.   (Click here for a detailed look at Technical Trading and Value Investing)

Nevertheless, my “big wave investing” approach (See Riding Giants at Very Low Risk) is based upon a long-term performance ethos amenable to both value and growth stock methodologies.  It is, however distinct from value and growth stock investing as stand alone strategies in the following ways:

  1. Big wave price movement encompasses the best performing value and growth stocks.
  2. We require that security analysis of value or growth stocks  be technically confirmed by favorable price movement prior to putting on a position.  In other words, our fundamental analysis is confirmed by technical analysis.

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Value and Growth Stocks

Value Investing and Growth Stock Investing enjoy phenomenal track records.  Value Investing favors underpricings of fundamentally sound Large and Mid Cap companies.  Champion value investors include:

  • Warren Buffet of Berkshire Hathaway
  • John Templeton of Templeton Growth, Ltd.
  • Mario Gabelli of GAMCO Investors
  • Seth Klarman of The Baupost Group

Growth stock investing, by comparison, favors sustained stock price increases in fundamentally sound Small Cap companies.  Champion growth investors include:

  • Philip Fisher
  • William O’Neil of Market Wizards, owner of Investor’s Business Daily
  • Marty Schwartz of Market Wizards
  • Dan Zanger, and others.

Rather than choose one technique over the other, to the extent both are proven to generate competitive returns, we are happily open to both.

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Technical Price Confirmation

Meanwhile, we have concluded the best defense against prevalent financial statement hocus-pocus and media-driven disinformation is for fundamental analysis to be confirmed by favorable price movement.  Put another way:

Chinese Blue Marble Half Slice

“Fundamentals don’t mean squat unless prices go up.”

–E. M. Murray

Chinese Blue Marble Half Slice


Please see The Reluctant Technician: Death Toll for Fundamental Analysis?

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E. M. Murray.  Managed Equities.  Fixed Downside Risk.
E. M. Murray.  Customized Portfolios.  Professional Management.  Fixed Downside Risk.
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