Warren Buffet’s strategy has changed over the years because the funds he manages have grown, according to Professor George Athanassakos article in Canada’s Globe & Mail. Both the old and new Buffett approaches are types of value investing but they differ in key ways.  The early-career Buffet followed the advice of his professor and the father of value investing, Ben Graham.  He picked stocks with low P/E (or P/B) ratios that, upon closer evaluation, were found to have an intrinsic value at least a one-third higher than the stock price.  Choosing such “cigar butt” stocks is an opportunistic approach suitable for short-term investment, and is the classic meaning of “value investing.”

With greater assets under management, Athanassakos writes, Buffet has moved to a different form of value investing.  He buys larger companies with higher than typical P/E (or P/B) values that “possess significant competitive advantages that are sustainable in the long term.”  This leads to Buffet’s well-known long holding periods because, given a sustainable competitive advantage, “chances are that their intrinsic value will be ahead of the stock price” over the long term as well. According to Athanassakos, value investing strategies can come in “several variations”, but the deep value, cigar butt style offers investors “offers many more profitable opportunities than the high quality, competitive-advantage-driven investing approach.”