Vivek Kaul: Warren Buffett and the mediocrity of investing

livemint.com:

Subscribe to enjoy similar stories. Wasim Barelvi is perhaps the greatest living Urdu poet. And when it comes to his poetry, my favourite couplet of his is: Har shaks daudta hai yahan bheed ki taraf, Phir ye bhi chahta hai usse raasta mille. This basically means: Every individual wants to run with the herd,
And then wants a right of way as well. (I am not a professional translator, so the beauty of the original is bound to be lost in translation.) Like all great poetry, the couplet summarizes what is perhaps a universal trait injust a few words.

The beauty of the couplet is in its brevity—in what it does not tell us—in the question it does not answer: why do people like to run with the herd? Dear reader, think of it in visual terms. Let’s say there is a herd of people approaching where you are standing. What will happen if you decide to go in the opposite direction? Well, if the number of people is huge, you are likely to be crushed by the sheer force of their movement.

The point being, physically or otherwise, it’s just easier to go with the herd. Why am I talking about this today? The 75th anniversary edition of The Intelligent Investor—The Definitive Book On Value Investing by Benjamin Graham was published a few weeks back. The book has an updated commentary by Jason Zweig, an investing columnist who works for The Wall Street Journal.

So, what is value investing? In simple terms, it involves buying the shares of a company that isn’t being properly valued by the stock market and holding it until the market starts valuing it properly. As Graham writes: “This value… is often determined chiefly by expected future earnings… Even a mere lack of interest or enthusiasm may impel a price decline to absurdly low levels. Thus we