Topic 7.3: Case Study: Analyzing a Classic Value Stock

Case Study: Analyzing a Classic Value Stock

Welcome back, investor.

In theory, value investing is simple: find a great business, and buy it for less than it's worth. But theories are not tested in calm seas. They are forged in the fire of crisis, when panic rules the market and even the most unshakable titans of industry seem poised to collapse.

Imagine this: it's 1963. A wave of fear is sweeping Wall Street. American Express—a name synonymous with trust and financial integrity—is being implicated in one of the most bizarre and audacious frauds in history, a scandal involving millions of pounds of nonexistent salad oil. The company's stock is in freefall, plummeting over 50%. The most respected institutions are dumping their shares in a desperate rush for the exits, terrified that the company is headed for bankruptcy. The consensus is clear: American Express is toxic.

But in Omaha, a young, little-known 33-year-old investor sees something no one else does. While the world is panicking, he is getting greedy. He decides to make the single biggest bet of his life, pouring an incredible 40% of his entire fund into this one collapsing stock. It was a move that looked like pure madness.

What was his secret? What did Warren Buffett see in the middle of that firestorm that every other expert on Wall Street missed? How did he find the courage to make a fortune while everyone else was losing their heads?

The answer is a masterclass in the true art of value investing. And we are about to reveal the exact, step-by-step analytical process he used to turn chaos into a legendary profit.