In his first edition of Security Analysis, back in 1933, Graham expressed disdain for Wall Street's near-obsession with earnings in determining the value of a public company. For Graham, book value was a better guide. ...Bill Graham was right. ...We took the largest 1,500 companies... for the 25-year period ended Dec. 31, 1994. ...We calculated returns for the 20% of stocks with the lowest and highest price-to-book ratios. ...[I]t was no contest. ...If you had invested $10,000 in the lowest... it would have returned $364,000... This more than doubled the return of the market as a whole... an equally weighted market index provided... $163,000. ...[S]tocks that sold at the handsomest premiums to book value... ended up with a miserable $92,000, about 55% of the market's return and only one-fourth ...the lowest price-to-book group. ...[E]motion favors the premium priced stocks. They are fashionable. They are hot. ...Emotion overrides logic time after time.

What It Means

This is a placeholder explanation generated by the low-overhead model. It interprets "In his first edition of Security Analysis, back in 1933, Graham expressed disdain for Wall Street's near-obsession with earnings in determining the value of a public company. For Graham, book value was a better guide. ...Bill Graham was right. ...We took the largest 1,500 companies... for the 25-year period ended Dec. 31, 1994. ...We calculated returns for the 20% of stocks with the lowest and highest price-to-book ratios. ...[I]t was no contest. ...If you had invested $10,000 in the lowest... it would have returned $364,000... This more than doubled the return of the market as a whole... an equally weighted market index provided... $163,000. ...[S]tocks that sold at the handsomest premiums to book value... ended up with a miserable $92,000, about 55% of the market's return and only one-fourth ...the lowest price-to-book group. ...[E]motion favors the premium priced stocks. They are fashionable. They are hot. ...Emotion overrides logic time after time." in the context of "David Dreman, "Ben Graham was right—again" (May 6, 1988) Forbes, p. 145." to mean that wisdom is timeless.