Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations

Chapter 5A Clockwork MarketMean Reversion and the Wheel of Fortune

“Even if we grant that analysis can give the speculator a mathematical advantage, it does not assure him a profit. His ventures remain hazardous; in any individual case a loss may be taken; and after the operation is concluded, it is difficult to determine whether the analyst’s contribution has been a benefit or a detriment. Hence the latter’s position in the speculative field is at best uncertain and somewhat lacking in professional dignity. It is as though the analyst and Dame Fortuna were playing a duet on the speculative piano, with the fickle goddess calling all the tunes.”

—Benjamin Graham, Security Analysis (1934)

The ancient Romans attributed King Servius Tullius’s exceptional good fortune to his consorting with the Goddess Fortuna.¹ Born to a slave, he rose to become the sixth king of ancient Rome, ruling for 44 years from 578 to 535 BCE. The Romans associated good luck with divine favor, and Servius was regarded as the luckiest of the kings. One evening, his mother—a Vestal Virgin responsible for cultivating the sacred flame in the royal household—took the sacrificial offerings from the royal table, and, as usual, cast them into the fire. As the flames died, a phallus arose from the hearth. Frightened, she ran to Tanaquil, the head of the household, and told her what had happened. Believing the apparition to be the Lar of the house, a deity that guarded the hearth, or the god Vulcan, Tanaquil dressed ...