The Search For True Value

- Simon Brown

Back in March, I wrote about Barloworld* in one of my ‘House View’ columns. I picked this stock because it is the only local stock that meets the classic value investing definition.

Value investing is a phrase thrown around with abandon in the investment world, but in truth we have very few true value investment managers. Even Warren Buffett, who studied under the father of value investing, Benjamin Graham, is no longer a value investor in the classic sense.

There is also an argument that value no longer has a place in investing, but I disagree with that. But at the same time, finding true value stocks, especially on the relatively small JSE, is often difficult.

The original concept of value investing is Benjamin Graham’s book, The Intelligent Investor. First published in 1949, it remains the default guide for value investing.

In the book Graham details the criteria a stock must meet in order for it to be considered a defensive value investment (he also deals with enterprise stocks, but for the purpose of this article, I am focusing on the defensive side).