📖Benjamin Graham
Price vs Value Gap
Long-term prices reflect value, short-term prices reflect sentiment.
In the short run the market is a voting machine but in the long run it is a weighing machine. Price eventually converges to value, but the timing is unpredictable.
🏠 Everyday Analogy
📖 Core Interpretation
In Price vs Value Gap, Benjamin Graham focuses on the gap between price and value. Returns come from paying less than what a business is worth, not from guessing short-term market moves.
💎 Key Insight：Patience allows the gap between price and value to close.
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❓ Why It Matters
Ignoring valuation turns even good companies into poor investments. Overpaying compresses future returns and leaves little margin when assumptions are wrong.
🎯 How to Practice
Estimate intrinsic value with conservative assumptions, set clear buy ranges, and act only when price offers a meaningful discount with acceptable downside.
⚠️ Common Pitfalls
Confusing a low price with true cheapness
Using one metric without business context
Overly optimistic assumptions that erase margin of safety
📚 Case Studies
1
Dot-Com Bubble Discipline (2000)
Technology and internet stocks soared despite little or no earnings, while many established companies traded below intrinsic value.
✨ Outcome：A Graham-style investor shunned speculative tech names, bought undervalued, profitable firms, and outperformed when the bubble burst and value stocks recovered.
2
Defensive Investor in Nifty Fifty (1973)
Buys diversified portfolio of blue‑chip ‘Nifty Fifty’ stocks at high P/Es before 1973–74 bear market, using dollar‑cost averaging and broad diversification.
✨ Outcome：Portfolio falls sharply in 1973–74 but many holdings recover over next decade, validating emphasis on quality and staying invested.
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