The only valuation formula Warren Buffett ever used, and why most investors get it wrong
Intelligent Investing
Synopsis
In a letter to shareholders, Buffett dismantled one of investing’s most persistent false dichotomies: “Value” vs “growth”. He contended that the two are not opposing philosophies – they are in fact joined at the hip. And that most people who call themselves “value investors” are not investing in value at all.
Somewhere along the way, the investment profession had divided itself into two warring camps: “Value” investors and “growth” investors. The value camp sought cheap stocks – low price-to-book ratios, low price-to-earnings multiples, high dividend yields. The growth camp sought companies with rapidly expanding revenues and earnings, willing to pay premium prices for the promise of future expansion. The two camps regarded each other with
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