More than three decades after his death, Ben Graham is still beating the market.
At least, Graham’s strategy is still handily beating the market, according to Validea.com’s guru-inspired portfolios, the original 10 of which recently hit the 7-year mark in terms of performance tracking. And the results show that Graham, known as “The Father of Value Investing”, is still king.
From its July 15, 2003 inception through July 15 of this year, Validea’s 10-stock Graham-inspired portfolio returned a total of 147.6%. That’s an annualized return of 13.8% per year — during a period in which the S&P 500 index returned a total of just 9.6% (1.3% per year).
Those results make the Graham approach the top performer of Validea’s original guru-based models, which were developed by CEO and co-founder John Reese. Most of Reese’s other approaches are also far ahead of the market. Coming in second is a model based on the writings of Tom and David Gardner, the creators of The Motley Fool investment web site. A 10-stock Gardners-based portfolio returned 128.3% (12.5% per year) over its first 7 years, according to Validea.com. And a 10-stock portfolio picked using a strategy published by money manger and Forbes columnist Kenneth Fisher has been almost as good, returning 119.2% (11.9% annually) over the same period.
Collectively, Reese’s 10 original guru-based model portfolios have returned an average of 9.3% per year over their first 7 years, more than 7 times the S&P 500’s 1.3% annualized gain.
“The exceptional results of the Graham approach over such a lengthy period, along with the performance of the vast majority of the other guru-inspired approaches we track, shows that the tenets of good investing are timeless,” Validea’s Reese said. “The specifics may change, but the results show that the broader concept of buying stock in companies with healthy balance sheets and strong fundamentals — which the gurus did — works very well over time.”
Since creating Validea.com’s 10 original 10-stock model portfolios, Reese has added four other strategies, all of which have beaten the S&P by fairly wide margins since their respective inceptions. Here’s a look at the performance of all of Reese’s 10-stock guru-inspired portfolios, which are rebalanced monthly: