The fact that Graham suggested different strategies for what he called defensive investors and enterprising (and more enterprising) investors does not mean that value investments and growth investments are mutually exclusive. Warren Buffett has shown that you can value invest in shares that grow over time. He has always acknowledged that his investment style is based on Benjamin Graham’s principles and he cannot understand why all investors don’t do the same thing. In March 2012, Buffett told a group of MBA students that:
The principles of value investing have not changed from the teachings of Ben Graham until now.
Buffett identified for the MBA students the two factors that mark the value investor: a long term perspective and the patience to not seek to get rich overnight: value investors are not concerned with getting rich tomorrow but over a ten year period instead.
There is nothing wrong with getting rich slowly.
But Buffett has added his own riders to Graham’s tenets and to some extent introduced a subjective element to the objectivity of Graham, particularly in his preference for businesses with a competitive advantage.
He gave the MBA students his (and our) favorite example - Coca Cola. He explained that people will go on drinking Coke because they like it; possible loss of markets in the Western world because of health concerns or competition is more than made up by new customers in other countries; the company has been doing the same thing for many years; it sticks to its core business; and if it decides to add a cent or two to the sale price of a Coke to adjust for inflation or to cover any loss of margins, nobody is going to stop drinking it.
At various times, Buffett has decided that Coke has fallen below its intrinsic value and stepped in and bought shares – that is value investing.
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