Aswath Damodaran was instrumental during my college studies. My professors referenced much of his work, which shaped my investment philosophy today (hence my Twitter and domain address).
I admire Warren Buffett, but I have never gone through a Warren Buffett fanboy faze. I always found it odd that people put their identity into being a “value investor” and strictly invest in low-multiple stocks. Over time, I realized these investors are merely betting against high-quality businesses simply because they do not fit the traditional value mold.
Excess Returns highlighted Aswath Damodaran’s view on value investing as one of the controversial guests from their podcast in 2024. Abbreviated for clarity:
Berkshire’s annual meeting terrifies me. It’s full of true believers. When I think about old-time value investing, the three words that come to mind are rigid, ritualistic, and righteous.
You’re supposed to do certain things as a value investor. You are supposed to go to Omaha and read Ben Graham’s Security Analysis. I wager only one in every hundred people who claimed to have read it have done so. I’ve written hideously boring books. But next to Ben Graham, my books are like Harry Potter to read.
Value investors believe that they are the chosen ones. They hang out with people who come to Omaha. They think they have found the one pathway to successful investing. I have no problem with that. But they look down on the rest of the world as shallow and stupid. One of the most dangerous things you can do in investing is to view the rest of the investment world with contempt because you’ve done the right things.
Investing is about faith, and I have faith, but I do not have dogma. A lot of old-time value investing has become dogma. They say, “You cannot do this, you should be doing this, you have to have a margin of safety.”
Warren Buffett is a much more flexible investor than many who claim to follow Warren Buffett. Old-time value investing has created these rules that they believe everybody should follow. To me, there is no one pathway to success. I love Peter Lynch. I love Warren Buffett. I like some things that George Soros does. There’s something to learn by looking at great investors in every philosophy.
What’s the best Philosophy? My advice is to look inward. Figure out what makes you tick. That’s going to tell you what the right philosophy is for you.
Aswath Damodaran’s critique of old-school value investing calls on investors to reflect on their approach to investing. The key is to develop a strategy that resonates with your unique temperament and goals.