Mr Buffett is often identified as the heir to his mentor, Benjamin Graham. Graham emphasised intelligent investment based on fundamental value. But in Graham’s day the ability to read a company balance sheet made an investor intelligent. Many trading companies sold in the market for much less than the realisable value of their assets. As Graham recognised by the time of his death in 1976, those days are over.
Mr Buffett’s central achievement was to recognise earlier and more clearly than others that these balance sheets no longer had their old meaning. Once, large business organisations found their rationale in the ability to finance and operate large industrial plants. The returns to shareholders were the reward for providing the plant and machinery.
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