- the value of thorough research
- the importance of demanding a margin of safety (price in relation to value)
-Believe risk is also a direct function of investor sentiment (High expectations = High Risk).
While Graham and Dodd explain these ideas in detail in both Security Analysis and The Intelligent Investor, Graham's little known1963 town hall lecture, Securities In An Insecure World, perhaps expresses them most clearly. The entire transcript is worth a read but we have included some relevant excerpts below:
On what it takes to outperform the market:
"Let me now make a general observation. For obvious reasons it is impossible for investors as a whole, and therefore for the average investor or speculator, to do better than the general market. The reason is that you are the general market and you can't do better than yourselves. I do believe it is possible for a minority of investors to get significantly better results than average. Two conditions are necessary for that. One is that they must follow some sound principles of selection which are related to the value of the securities and not to their market price action. The other is that their method of operation must be basically different than that of the majority of security buyers. They have to cut themselves off from the general public and put themselves into a special category.