Not many people are aware of the existence of the two approaches to Value Investing. Most investors understood the qualitative method, but fewer have heard about the quantitative method. I think it isn’t the fault of investors but rather, the success of Warren Buffett puts the qualitative approach to the fore. I first wrote about investing in assets versus investing in earnings, and this article extends the discussion on the differences.

Benjamin Graham coined the terms “Qualitative” and “Quantitative” approach to investing in his book, “The Intelligent Investor”. I quote,

“Our statement that the current price reflects both known facts and future expectations was intended to emphasize the double basis for market valuations. Corresponding with these two kinds of value elements are two basically different approaches to security analysis. To be sure, every competent analyst looks forward to the future rather than backward to the past, and he realizes …