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David Dodd

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David LeFevre Dodd (1895 - 1988) was an American economist, financial analyst, collegiate educator, author, and close colleague of Benjamin Graham (1894 - 1976) at Columbia University.

The Wall Street Crash of 1929 (Black Thursday) almost wiped out Graham, who had started teaching the year before at his alma mater, Columbia. The Crash inspired Graham to search for a more conservative, safer way to invest. Graham agreed to teach with the stipulation that someone take notes. Dodd, then a young instructor at Columbia, volunteered. Those transcriptions served as the basis for a book that galvanized the concept of Value Investing. The book was called "Security Analysis" (pub. 1934). This book, a thick one, became the Bible for Value Investors. After cooling off from irrational exuberance in the 90s, today, more than ever, Graham and Dodd's approach to Value Investing serves as a compass for legendary investors, one of whom is Warren Buffett, who attended Columbia University (MS Economics '51) specifically to study with the duo.

Contents

Editions of

Value Investing

The phrases "Graham and Dodd," "value investing," "margin of safety," and "intrinsic value" are revered by value oriented practitioners. Despite the onset of Modern Portfolio Theory (MPT) in the late 1950s – a theory that peaked throughout the 80s and even gained Nobel recognition in 1990 (co-laureates: Harry Markowitz, Merton Miller, William F. Sharpe) – Value Investing proved to be a formidable style that sharply defied MPT. The University of Chicago was at the center of MPT (see "quantitative analyst") while Columbia has been the mecca for Value Investing for 7-1/2 decades. Many cracks in MPT are now well established, whereas the basics behind Graham & Dodd’s approach to Value Investing are as valid today as when they were first introduced.

Value Investors see securities as either priced correctly, under priced, or over priced. By contrast, MPT proponents insist that, by definition under the efficient market hypothesis, a realized price of a stock is the correct price. Value investor purists reject the usefulness of Capital Asset Pricing Model (CAPM), in part, because it wrongly extrapolates historical volatility as a proxy for risk. Ergo, value investors see MPT metrics -- such as standard deviation, beta (relative standard deviation), alpha (excess return), and the Sharpe ratio (risk adjusted return) -- as inadequate and even misleading.

While Columbia resisted de-emphasizing Value Investing during the throes of the MPT renaissance, wide popularity of Value Investing among academicians and MBA students surged to a higher plateau under [Professor Bruce C. Greenwald], a star professor, who invigorated the academic aspects of an erstwhile vocational disipline. The success of Warren Buffett's Berkshire Hathaway is a statistical three-sigma event unto itself. But, not including Buffett, the success of numerous other investment funds and practitioners who applied Value Investing theories is a statistical anomaly. (Statistical reference to the magnitude of success is an ironic metric since Value Investing ignores the use of sophisticated statistics that is used in MPT). Greenwald overhauled and relaunched the Value Investing curriculum in spring 1994. Today, Value Investing enjoys broad appeal among academicians and investors around the world. Professor Greenwald is Robert Heilbrunn Professor of Finance and Asset Management and Finance and Economics and Director of the [Heilbrunn Center for Graham and Dodd Investing].

Academic Timeline

Honorary Degree

Personal and Professional Timeline

Vice Chairman Profit Sharing Plan of below companies (1960)

Memberships

Residence in the 1960s: 39 Claremont Avenue, New York City

Obituary

David Dodd died September 18, 1988, at the age of 93, of respiratory failure at Maine Medical Center, Portland, Maine. At the time of his death, he had homes in Falmouth Foreside and Chebeague Island, ME. He was a Protestant. There was no funeral service. He was survived by his second wife, the former Lillian Lane; a daughter, Barbara Dodd Anderson (nee Barbara LeFevre Dodd) of San Francisco from his first marriage to Elise Firor Dodd (nee, Elise Marguerite Firor; b. Mar 22, 1898 - d. Jan 1981); and two grandchildren, David Anderson and Gail Anderson. Barbara Anderson is a benefactor of the [Heilbrunn Center for Graham and Dodd Investing] at Columbia Business School.

That the time of his death, the editions of the book he coauthored, "Security Analysis," had sold over 250,000 copies.

"The four most dangerous words in the English language are 'This time it's different.'" - David Dodd, late 1930s

Also by David LeFevre Dodd

Dodd, David LeFevre, "Stock watering: the judicial valuation of property for stock-issue purposes" (January 1, 1930), Columbia University Press

 

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