“Most value investors take their inspiration from Ben Graham. The most famous of them all is Warren Buffett. He started off as what we call a boat type of investor and then went on to became a moat type of investor. But what does value investing really mean? When evaluating fixed-income securities, there is no disagreement over what value is; it is very easy to define. In equities, you have a notion of what short-horizon value is — what we categorise as relative value. The next big category is what is called deep value, and for the purpose of our discussion, we will call it boats. This is primarily the Graham-and-Dodd way of looking at things: in an extraordinarily cheap way. These guys made no distinction about the quality of the business.
They were just looking for cheap businesses,
which were very often very poor businesses.
On the contrary, Buffett and Munger looked for high-quality businesses. Be it Graham or Buffett, for me, the most fascinating thing is: how do they view risk? The core idea they operate on is the concept of margin of safety. Like Charlie Munger, Buffett’s partner says: ‘You have got to have different checklists and different mental models for different companies. This is not an easy business.’ If one of the most successful investors in the world says this is not an easy business, then what are we to do? One thing we can do is listen to successful investors who have practised this craft in our part of the world.”
Those were the opening words of Vikram Kuriyan, clinical professor of finance, ISB at the annual investment conference titled ‘The Practice of Value Investing’ by ISB in Mumbai. Here is the first of the nine part series on the subject by three distinguished Indian investors — Jeetay Investments co-founder and director Chetan Parikh, Motilal Oswal co-founder Raamdeo Agrawal and Amansa Capital founder Akash Prakash.
Carl Jacobi, the great 19th century G