Is “value investing” a kind of investing?

Isn’t Benjamin Graham the father of value investing?

If I told you Shaquille O’Neal was the father of the stepback three, you would rightly dismiss it. He made exactly one three-pointer in his NBA career, 1 of 22, a one-handed heave off the glass at the end of a quarter in 1996. The evidence isn’t there for the claim.

Look at the same kind of evidence for Graham, and look at what he said himself, not what the media later said about him.

• I traced the subtitle of every edition of The Intelligent Investor. “Value investing” is in none of the editions Graham published, 1949 to 1973. It first appears on the cover of the 1986 edition, after his death, which carries the line “The National Bestseller on Value Investing for Over 35 Years” and adds an introduction and appendix by Warren Buffett. The catalog subtitle stays “A Book of Practical Counsel.” The current subtitle is “The Definitive Book on Value Investing.”
  Catalog records for the lifetime editions, each showing the subtitle “A Book of Practical Counsel”: 1949 (auction listing), 1954, 1959, 1965, 1973. The 1986 cover: Amazon listing.
• I searched the full text of the revised edition of The Intelligent Investor, which includes Graham’s text, Jason Zweig’s commentary and Buffett’s appendix. “Value investing” is not in the table of contents, the index, Graham’s chapters or Zweig’s commentary. It appears only in Buffett’s appendix, in the editor’s note introducing that appendix, and in the publisher’s author biography, which calls Graham “the father of value investing.” Zweig has also written that Graham never used the phrase in his books or speeches.
• The same holds for Security Analysis. In the sixth edition, I found no use of “value investing” in the chapters and prefaces written by Graham and Dodd. Every use is in commentary added later, most of it in Seth Klarman’s preface.
• Graham did describe his own style as a “value approach” in a 1974 speech. Of course value is at the core of investing, and that does not make “value investing” a category. That leap is the fallacy.

I know of no instance where Graham called what he did “value investing.” It is a posthumous label. It is catchy, but he didn’t use it.

What about Warren Buffett? Isn’t he Graham’s disciple and the most successful value investor?

Graham’s disciple, yes. A value investor, by his own account, no. In his 1992 letter to shareholders, Buffett wrote, “we think the very term ‘value investing’ is redundant. What is ‘investing’ if it is not the act of seeking value at least sufficient to justify the amount paid?” If the man most associated with the label doesn’t think it describes a distinct kind of investing, why should we?

By my count, across his Berkshire letters and his Superinvestors essay, Buffett used the phrase “value investing” six times: three in his essay “The Superinvestors of Graham-and-Doddsville,” reprinted as an appendix to The Intelligent Investor, once in the 1988 letter, and twice in 1992. He used it approvingly through 1988, then called it redundant in 1992. In his letters after that, I found none.

What about value versus growth?

The people most associated with the divide reject it.

• Buffett, 1992: “In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value.”
• Buffett, 2001 annual meeting: “Anybody that tells you [to put your money in] growth stocks or value stocks really does not understand investing.” He added, “you can call that value or you can call it growth, but they’re not two different categories.”
• Howard Marks, in his memo “Something of Value,” argues that value and growth “should never have been viewed as mutually exclusive to begin with.”
• Joel Greenblatt, 2021: “There is no growth investing and value investing. There is investing. Growth and value are tied at the hip.”

If there is no factual basis for the label, why is it so common?

I can’t prove why. A catchy phrase and unchecked assumptions are enough to explain much of it, and for some people ambiguity is profitable.

Why does it matter? Anyone who values a business and buys at a discount is doing the same thing either way.

It matters for three reasons. First, by boxing themselves in with a “value investor” label, disciplined investors leave room for other kinds of behavior and don’t get the differentiation they deserve. Second, in the expanded universe that follows, speculation, and even gambling, gets called investing. That is a serious financial literacy problem. Third, the label changes how the laws apply and how we should think about investor protection.

Why is this a good test for an AI model?

A language model learns from how language is used, and “value” and “investing” appear together constantly. A model trained that way will likely conclude that value investing exists, because on frequency alone it looks like a category. Many publications on Substack alone have the phrase in their titles.

But the truth is not decided by how many people use a phrase. It is decided by whether the historical record supports the claim: what Graham wrote, what Buffett said, and how the label entered the books. That makes this a case I would like to use as a benchmark. Can a model tell the popularity of a phrase from the evidence for a claim?

I asked three AI assistants to explain value investing. None of them noted that the phrase came after Graham or that Buffett called it redundant. Read the test.