ACU (Australian Catholic University)

Insight

Issue 2, Spring 2011

The value in investing

The value in investing

Finance Professor Donald Ross talks ethics and investing with Amanda Geddes.

Ethical leadership, sustainability and durable management will help any business thrive during tough times, regardless of whether the owner is managing a mega-sized budget – Warren Buffett-style, or a resource-constrained hospital in Papua New Guinea, ACU Professor of Finance Donald Ross said.

With more than a quarter of a century of university teaching experience, Professor Ross’ career has taken him around the globe, giving him the opportunity to interview and learn from leading players in the world’s financial markets. He then shares his knowledge of the philosophy of value investing.

"Value investing is a philosophy which is very old style; it goes right back to Benjamin Graham and David Dodd’s 1934 text Security Analysis, and Graham’s classic book The Intelligent Investor published in 1949."

Professor Ross said the principle of value investing is to attain deep value through heavy analysis of an enterprise and to be independent from the rest of the financial market.

"Value investors become interested when the market starts to hate a company – they think the market might have it wrong."

In 2009, during the peak of the global financial crisis, Professor Ross led a team of student researchers as they interviewed some of America’s leading financial players who follow the principles of value investing – including Warren Buffett, the successful investor and philanthropist.

"Many people practising a value investing philosophy thrived in the global financial crisis as, for them, it was an opportunity."

It is this value investing philosophy employed by successful investors such as Buffett that Professor Ross teaches his students.

"I always tell my students that I want to buy stocks that are going down, not going up. If I like a stock at $25 one week, I should love it at $15 the next week. To wait for it to go from $25 to $35 before buying it just doesn’t make sense. An investment should be good, safe and cheap."

And the link with PNG? Along with other ACU professors, Professor Ross has been working with Divine World University as a volunteer, helping to design and implement an MBA program that has a foundation of ethical leadership, sustainability and durable management.

"We get to work with managers in PNG who are responsible for thousands of employees in the health service and natural resource sectors, as well as in high levels of government. They can use those responsible finance skills to do their jobs better."

Despite the hype that investment banking is a greedy industry, Professor Ross believes that knowledge of finance and investing has a higher purpose in society.

"Investing is a socially useful tool. I like finance for its social usefulness in effecting the efficient allocation of resources; there is a social purpose to it all.

"We teach a responsible decision-making process that is ethical, durable and sustainable, which is highly regarded in the marketplace where our graduates are also technically strong.

"Finance is an honourable industry and it can be very honourable if you have the right value set going into it and a very solid perspective on life."

Through his own professional experience and research, Professor Ross believes that the connection of financial markets globally is important for sustainability.

"We have to stay connected globally. Learning from the best in the world is a wonderful thing and teaching what you have learned is a wonderful thing, too.

"There is a certain joy from sharing what we have learnt."

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