When Stocks Become Collectibles
The anecdotes entertain, but the economic implications should not be ignored.
Cash Was King
Traditionally, equity research evaluated the ability to generate cash. Published three years after Joy of Cooking and equally influential in its field, Benjamin Graham’s Security Analysis recommended buying companies that were valued by the stock market at less than the amount of money on their books. That was the ideal situation. Failing such opportunities, prudent investors could purchase firms that had high expected future cash flows relative to their stocks’ current price.
For Graham, what mattered was corporate operations, rather than the actions of rival investors. Wrote Graham, “The stock investor is neither right nor wrong because others agreed or disagreed with him; he is right because his facts and analysis are right.” Similarly, “Investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
John Rekenthaler does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.