4  Value Investing

Published

April 25, 2025

4.1 Introduction

TODO: Price data is pretty easy to come by, but where does one scrape up-to-date earnings data?

4.2 Growth vs value investing

  • TODO

4.3 P/E ratio

Tables of P/E by US industry:

P/E ratio by S&P500 sector:

4.4 Margin of safety

1 Graham (2003).

Figure 4.1: The cost of loss (Graham, 2003, p. 526).

4.5 Buffett Indicator

2 Buffett (2017).

4.6 Reading a 10-K

4.7 Graham’s special paradox of mathematics and investment

As a physicist, I support the skillful application of mathematics. In these notes, we have used some calculus, linear algebra, and numerical optimizations.

Still, noting Graham:

[T]here is a special paradox in the relationship between mathematics and investment attitudes on common stocks, which is this: Mathematics is ordinarily considered as producing precise and dependable results; but in the stock market the more elaborate and abstruse the mathematics the more uncertain and speculative are the conclusions we draw therefrom. In 44 years of Wall Street experience and study I have never seen dependable calculations made about common stock values, or related investment policies, that went beyond simple arithmetic or the most elementary algebra. Whenever calculus is brought in, or higher algebra, you could take it as a warning signal that the operator was trying to substitute theory for experience, and usually also to give to speculation the deceptive guise of investment. 3

3 Graham (2003), p. 570.

4.8 Misc