To: Paul Senior who wrote (51792 ) 6/28/2013 4:06:12 PM From: paulelgin Read Replies (2) | Respond to "Graham and Dodd's principles - such as the stability of cash flow, sufficiency of return, and analysis of downside risk - allow us to identify... investments with a margin of safety in any market environment. Even complex derivatives not imagined in an earlier era can be scrutinized with the value investor’s eye. While traders today typically price put and call options via the Black-Scholes model, one can instead use value-investing precepts—upside potential, downside risk, and the likelihood that each of various possible scenarios will occur—to analyze these instruments. An inexpensive option may, in effect, have the favorable risk-return characteristics of a value investment —regardless of what the Black-Scholes model dictates." Security Analysis . As value investors, we must strike a balance between flexibility in searching various asset classes for value, while also maintaining our rigorous adherence to those criterion which constitute an absolute, rather than relative, value investment.across asset classes which drive them to ridiculous levels, be those invesments in real estate, call and put options, gold, stocks, or bonds. However, we should refrain from posting about ideas of "relative," rather than absolute, value, as the inclusion of these securities (though their examination may flex our fundamental analysis muscles) is not appropriate as they constitute speculations rather than investments.
