Symantec Stock: A Buy in Chaos

When an accounting lie comes up at a publicly traded company, I often think of Benjamin Graham’s advice to never consider the stock as a suitable investment because the accuracy of the numbers presented is a necessary component of estimating fair value. Knowledge of revenues, profits, and other critical figures form the basis of how we determine whether an asset is overpriced, fairly priced, or cheap.

It is also true that Graham’s thesis developed at a time when the majority of American success stories required heavy capital allocations as a source of value, whereas now the excellent businesses rely much more on the networking effect on users and are correspondingly asset light, i.e. if a water utility company lied and falsely claimed too many customers and profits, the disaster is that all sorts of debt provisions could cause the balance sheet to crumble its way to bankruptcy. Now, if a company like Google committed a similar mistake, the effects would be dramatically less because the business model is successful to the extent that you visit when you want to look up a matter.

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