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To most people (particularly non-smokers), the idea of picking up a cigar butt from the gutter would rank fairly high on the ‘disgusting’ scale. Lighting it up and taking a few puffs - even more so. After all, there’s a reason people throw things away. Usually, it’s because they’re unloved, unwanted, or worthless. Often all three apply.
Benjamin Graham lost around 70 per cent of his wealth in the Wall Street crash of 1929. Despite that, nearly a century later, he’s still regarded as the father of Value Investing. To provide some perspective, Graham fared better than the average punter. Within three years of ‘Black Thursday’ in 1929, the overall market had fallen by 89.2 per cent. Fortunes had been lost, and the Great Depression was well underway.
32 years ago, everybody who held a Commonwealth Bank account received a hefty document in the mail. It was an invitation to become a shareholder in the bank, which until then had been government-owned. The minimum investment was 400 shares at a price of $5.40 – a total of $2,160. The canny people who wrote out a cheque for $2,160 and put their share certificate in the bottom drawer are today sitting on a holding worth around $52,500. That’s a 1,700 per cent return.