FYI: On WEALTHTRACK this week we focused on the sea change occurring in investing. This week’s market rout couldn’t have been timed better for this conversation.
While all stocks are getting hit, tech stocks are among the biggest losers. The opposite of what’s happened over the last decade or so. Growth stocks, typically companies with above average growth in revenues, earnings, or both, have way outperformed value stocks, defined as companies whose current share prices trade below their estimated future value.
That is the exact opposite of what happened in the last hundred years. Between 1926 and 2016 value stocks clocked in impressive 17% annualized returns, versus about 13% for growth stocks. Are we seeing a reversal to the historic norm?
Another big change that is being challenged this week: stock picking has fallen out of favor. The average stock mutual fund manager in the U.S. has underperformed the market in various time periods over the last decade or more. And with a few exceptions such as foreign stock funds and intermediate-term bond funds the underperformance has spread to other asset classes.
No wonder that investors have been accelerating their moves into passive index funds and out of actively managed funds of all types. Will the market correction slow that trend?
What would Benjamin Graham and David Dodd, the fathers of professional stock analysis and legendary value investors, think of these investment sea changes?
The two Columbia University professors wrote the classic book, Security Analysis, in 1934. Several editions later, it is still studied by finance students all over the world.
Benjamin Graham, considered to be the father of value investing, wrote the definitive book on the subject The Intelligent Investor in 1949. Warren Buffett, a student of Graham, calls it “…by far the best book on investing every written.”
This week’s WEALTHTRACK guests are leading financial journalists and thought leaders with an intimate knowledge of the thinking of Graham and Dodd because they both worked on the most recent editions of their investment classics.
We’ll be joined by James Grant, founder and influential editor of Grant’s Interest Rate Observer, a twice monthly journal about all interest-sensitive investments, which pretty much covers the waterfront. An accomplished author in his own right, Grant wrote the introduction to the sixth edition of Security Analysis, providing the historical backdrop.
We’ll also hear from Jason Zweig, editor of the revised edition of Benjamin Graham’s The Intelligent Investor and since 2008 author of the widely read column by that name for The Wall Street Journal. Zweig is also the author of several books including Your Money & Your Brain, one of the first books to explore the neuroscience of investing, and The Devil’s Financial Dictionary, a satirical glossary of Wall Street.
Warren Buffett wrote the forward to the most recent edition of Security Analysis which was published in 2009, saying that its authors “…laid out a roadmap for investing that I have now been following for 57 years. There’s been no reason to look for another.”
Given the lagging performance of value investing, at least until very recently, I asked Grant and Zweig how useful that roadmap is today?
If you’d like to watch the show before it airs, it is available to our PREMIUM viewers on our website right now. Also, exclusively online, we’ll share additional EXTRA interviews with both Grant and Zweig.
Plus, a reminder that if you would like to take WEALTHTRACK with you on your commute or travels, you can now find the WEALTHTRACK podcast on TuneIn, Stitcher, and SoundCloud, as well as iTunes. Find out more on the WEALTHTRACK Podcast page.
As always, thank you so much for watching. Have a great weekend and make the week ahead a profitable and productive one.
Best regards,
Consuelo
Regards,
Ted
Video Clip:
Jason Zweig's Blog:
http://jasonzweig.com/category/blog/Jim Grant's Blog:
https://www.grantspub.com/ 
