The "Value Line" Defined
The "Value Line" was a line representing a multiple of cash flow that Bernhard would visually "fit" or superimpose over a price chart. This was a pioneering attempt to normalize the value of different companies. He soon began publishing his investment survey.
In 1946 Bernhard hired Samuel Eisenstadt, a brilliant and modest young man fresh out of the Army, as a proofreader. Eisenstadt was a graduate of Baruch College who majored in statistics. In 1965 Eisenstadt convinced Bernhard to use a statistical method called ordinary least squares (OLS) regression analysis to replace Bernhard's visual method of fitting cash flow to a price chart. Using scores of Monroe mechanical calculators and a handful of data operators, Bernhard and Eisenstadt produced a stock picking system so successful that it caught the attention of the famed academician Fischer Black of the University of Chicago. Black validated the system's results when he published his famous article in the Financial Analysts Journal, "Yes, Virginia, There is Hope" in 1973. The system came to be known as the "Value Line Ranking System for Timeliness". With Eisenstadt on board, Bernhard continued to expand the business, adding the other publications and mutual funds along the way. In May 1983, Value Line sold stock for the public for the first time (NASDAQ: VALU), though the Bernhard family retained 80% control. Bernhard died in December 1987, but until his death, Bernhard continued his literary interests by combining with W. H. Auden, Jacques Barzun and Lionel Trilling in founding the Mid-Century Book Society.
Shortly after his death, his daughter, Jean Bernhard Buttner, was named CEO of Value Line. Jean Buttner was forced to resign her position as CEO in November 2009, to settle fraud charges by the Securities and Exchange Commission described below.
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