Keep INVESTING Simple and Safe (KISS)
****Investment Philosophy, Strategy and various Valuation Methods****
The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Part of the question of whether Benjamin Graham is still relevant today arises from the popularity and success of Warren Buffett. During the course of his career, Buffett has essential blazed a trail away from the core strategies of Benjamin Graham. He's been quite successful, too, recording returns much higher than Benjamin Graham ever did.
Buffett's most recent plain vanilla approach to investing involves buying good companies at good prices and not looking for the statistical bargains that Graham advocated. Instead of buying bargains and selling them when they rise back to fair value, Buffett mostly holds onto his stocks forever.
Buffett has also spent a lot of time talking to the press and students about investing and business, which has lead many people to adopt the contemporary Buffett approach to investing.
Investors should definitely keep two things in mind when it comes to Buffettology, however. First, Buffett's investment philosophy is still rooted in the philosophy of Benjamin Graham and, second, Buffett racked up his biggest returns in the 1950s and 1960s when he was still using Benjamin Graham's investment philosophy.
Buffett still uses significant aspects of Graham's approach -- specifically the focus on valuation. All of his investment decisions involve judging the value of the business and then using that value as the bedrock from which he assesses the investment's merit. Bad things can happen to your net worth when you buy great companies at expensive prices. He also recognizes that reversion to the mean is nearly a fundamental law in business so looks to ways to protect himself by buying firms with strong competitive advantages.
Despite Buffett's great long term track record, his Buffett Partnership letters reveal that he was achieving his highest returns while he was using Benjamin Graham's classic value investing approach -- the cornerstone of which was Graham's net net stock strategy. During the 1950s and 1960s he earned returns of roughly 30%, and only changed his strategy when his portfolio became to large to continue buying net net stocks.
Warren Buffett had the best results of his career during his partnership days. His later returns had to be much lower to drag down his average returns to 20%.
After the change, while Buffett still earned outstanding results, they were not nearly as good as they were before the change in investment strategy. It's worth noting that even now Buffett would chose to use a classic Benjamin Graham approach to value investing if he was managing a portfolio under $10 million.