I had Gemini run a comparison between Carret and Graham the results are summarized below. My own approach evolved to be more Carret than Graham with putting management skill at the center vs mathematics. The industry made a choice long ago to go with Graham’s approach because it was far more definite. After all, mathematical analysis provides a price point per share to the penny and it seems scientific. The problem with this is that math does not run companies. It is only used by management teams to outline to others and to themselves, ‘How are we doing in the bigger picture!’. It remains the actual process of management to mesh all the parts of a business together into some form of a Swiss timepiece so that others can tell what time of day it is within the competitive business landscape and the ever bigger global economic-scape.
Modern Portfolio Theory is all Ben Graham-thinking. Carret’s views have not been grasped but for a few. Singleton and Buffett seem to have operated on Carret’s basis. Neither outlined this as well as Carret. Management skills are only identified over a period of time. They are defined by what they say they expect to do, what they in fact end up doing with exceptions during unexpected challenges being very good identifiers of management skill.
Identifying a competent management team has a process that can be taught but the actual skill set requires human insight personally developed over multiple examples across multiple years and even across one or two business cycles. Once developed, a competent management team installs their process into their business model at all levels including their Board of Directors. They want all to understand where in the operation of the business each has a role and personal responsibility to act in the best interests of not only the business but the customer. We call this Lean Six Sigma.
When one identifies management teams operating on Lean Six Sigma principles whose corp share price is heavily discounted, one will find a good investment. Carret’s “The Art of Speculation” link is:
https://dn721609.ca.archive.org/0/items/artofspeculation0000phil/artofspeculation0000phil.pdf
Head-to-Head Comparison: Carret vs. Graham
| Investment Dimension | Philip L. Carret (The Art of Speculation) | Benjamin Graham (Security Analysis / The Intelligent Investor) |
| Core Philosophy | Disciplined Foresight: Speculation is a creative business craft that aligns market prices with future corporate trajectories. | Strict Capital Preservation: Investing is a mathematical operation that ensures safety of principal and an adequate return. |
| Primary Valuation Metric | Future Earning Power: Focuses on stable or expanding operating margins and a company’s ability to compound value over multi-year cycles. | Net-Net / Asset Value: Focuses on Current Asset Value minus total liabilities (buying a dollar of liquidation value for 50 cents). |
| View on Corporate Management | Paramount Qualitative Factor: Leadership quality, “skin in the game” via stock ownership, and operational adaptability dictate a firm’s ultimate destiny. | Secondary or Agnostic: Management is fickle and hard to quantify; if you buy a company cheaply enough based on its physical assets, management matters less. |
| Diversification Strategy | Moderate & Flexible: Recommends owning a minimum of 10 to 12 stocks across different industries, actively reallocating capital to the strongest business concepts. | Broad & Systematic: Recommends a highly diversified basket of 30+ deeply undervalued or “cigar-butt” stocks to let statistical probability protect the portfolio. |
| Attitude Toward Growth | Embraces Technological Shifts: Actively seeks companies adapting to or driving structural, industrial innovations (e.g., the pivot to automobiles). | Deeply Skeptical of Growth: Views growth projections as speculative illusions; prefers buying stale, out-of-favor firms with clear, tangible liquidation values. |
| Portfolio Maintenance | Active Re-appraisal: Demands regular, granular checking of company fundamentals; sell if the business model degrades or management fails. | Passive / Formulaic: Favors buying at a deep discount to intrinsic value and holding until the price corrects to asset value, then selling systematically. |