The main ideas about successful investing have not changed much since Benjamin Graham wrote "The Intelligent Investor" in 1949. If investing fundamentals have not changed much in 70 years, do we really need another investing book?
Yes, because while the important investing concepts have not changed, many companies use technology to grow and compete. The modern investor needs updated tools to decide which investments make sense.
When Graham wrote about investing, companies like American Motors, Brown Shoe, Studebaker, Collins Radio, Detroit Steel, Zenith Electronics, and National Sugar Refining were Fortune 500 companies. None of these companies exist today, although many companies from that epoch survived: Boeing, Campbell Soup, Disney, Coca Cola, McDonald's, Whirlpool, and GEICO are among the stocks that Ben Graham and Warren Buffett studied and invested in seven decades ago.
A new kind of company dominates the business landscape today. Amazon, Adobe, Apple, Facebook, Google, Netflix, Nvidia, Microsoft, Starbucks and Tesla epitomize the modern company whose success or failure depend upon adapting to rapidly changing technologies. Their growth is on a different scale than companies of the past, and companies like Amazon and Tesla forego profits today in efforts to dominate their industries tomorrow.
Today's investors need a new set of tools to evaluate stocks. They don't need complex tools, they need simpler tools. I see many beginning investors buying stock because the price is going up, and they think the company is going to make them rich - even though the company does earns a small profit - or no profit today. In order to avoid the disastrous results which almost always follow speculation, the modern investor needs a checklist and a systematic process to evaluate companies that will compound invested dollars for years to come while protecting investors from losing money.
Today's fast-growing companies need to adapt, grow, experiment and pivot in new ways, and today's investor needs new tools for evaluating these companies.
Ben Graham's most successful student, Warren Buffett, had to adapt Graham’s “deep value” investment philosophy of buying cheap stocks in low-quality companies so he could improve his results by paying up to buy stocks of higher quality companies.
Yet despite his ability to adapt the way he invests, Buffett has recently admitted to missing "big time" when it comes to opportunities to invest in companies like Google and Amazon, which he admires and understands.
Buffett’s strict desire to avoid paying too high a price has prevented him from investing in Amazon, for example. However, a successful modern investor needs flexibility when it comes to the price paid for technology stocks. Companies with seemingly limitless potential for future growth often sell at high prices compared to more stable, predictable, traditional companies. Today's investor needs to be able to assess which companies make most sense, and be flexible enough to “pay up” for a growing company with a solid business, product, or platform and a clear path to profits.
New eyes bring new ideas. It was not until Buffett hired Todd Combs and Ted Weschler to help him invest at Berkshire Hathaway that the company changed; in 2016 Berkshire invested for the first time in Apple, the investing idea of either Combs or Weschler (Buffett never divulges which of them is responsible for specific purchases). The new idea of an Apple investment was such a smart one that it persuaded Buffett to make his own large purchase of Apple stock a few months later in 2017.
I do not have the hubris to think my book can improve upon the wisdom of the investing masters, however, I do understand the factors that make a great investment, and I can explain these concepts simply.
This book brings the old-style of investing into the modern age. It's the "next step" that carries the torch of Graham and Buffett’s rational approach and shows you how to adapt their concepts for investing in companies from Activision Blizzard and Adobe Systems to Zimmer and Zoetis. No matter who you are or how you invest, this book will provide you with useful tools to invest for your future.
Available for purchase on Amazon beginning December 12, 2017.