This post is based on Chapter 50 of the Sixth Edition of Security Analysis – ‘Discrepancies between Price & Value’. It’s an invaluable chapter that provides a systematic method for investors to seek investment opportunities in the market, something that is not covered extensively in The Intelligent Investor.

Most financial analysts and investors expend the greater part of their time and effort on determining the future prospects of selected companies; that much is a given. What most people fail to note is that Graham’s method was different. His focus was on the previous performance record of the business itself, and he placed little emphasis on attempting to predict the future performance of the selected business. Although this distinction may seem subtle, it carries significant repercussions for the way an investor should shape his research process.

Although Buffett and Graham shared a common way of thinking, the method by which each ...