; May 9, 1894 September 21, 1976) was a British-born American investor, economist, and professor. He is widely known as the father ofvalue investing,and wrote two of the founding texts in neoclassical investing:(1949). His investment philosophy stressedinvestor psychology, minimal debt,buy-and-holdinvesting,fundamental analysisconcentrated diversification, buying within themargin of safetyactivist investing, andcontrarianmindsets.
After graduating fromColumbia Universityat age 20, he started his career on Wall Street, eventually founding the Graham-Newman Partnership. After employing his former student,Warren Buffett, he took up teaching positions at hisalma mater,and later atUCLA Anderson School of Managementat theUniversity of California, Los Angeles.
His work inmanagerial economicsand investing has led to a modern wave of value investing within mutual funds, hedge funds, diversified holding companies, and other investment vehicles. Throughout his career, Graham had many notable disciples who went on to receive substantial success in the world of investment, including Buffett, who described him as the second most influential person in his life after his own father.
Graham was born Benjamin Grossbaum inLondon, England2to Jewish parents.34He moved toNew York Citywith his family when he was one year old. After the death of his father and experiencing poverty, he became a good student, graduating assalutatorianof his class at Columbia. He declined an offer to teach English, mathematics, and philosophy, choosing instead to take a job onWall Street, where he eventually started his Graham-Newman Partnership. Early on, Graham made a name for himself with The Northern Pipeline Affair, involvingJohn D. Rockefeller.5
His first book,Security AnalysiswithDavid Dodd, was published in 1934.678910InSecurity Analysis, he proposed a clear definition of investment that was distinguished from what he deemed speculation. It read, An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.11
Warren BuffettdescribesThe Intelligent Investor(1949) as the best book about investing ever written.12Graham exhorted the stock market participant to first draw a fundamental distinction betweeninvestmentandspeculation.
Graham wrote that the owner of equity stocks should regard them first and foremost as conferring part ownership of a business. With that perspective in mind, the stock owner should not be too concerned with erratic fluctuations in stock prices, since in the short term thestock marketbehaves like a voting machine, but in the long term it acts like a weighing machine (i.e. its true value will be reflected in its stock price in the long run). Graham distinguished between the passive and the active investor. The passive investor, often referred to as a defensive investor, invests cautiously, looks for value stocks, and buys for the long term. The active investor, on the other hand, is one who has more time, interest, and possibly more specialized knowledge to seek out exceptional buys in the market.13Graham recommended that investors spend time and effort to analyze the financial state of companies. When a company is available on the market at a price which is at a discount to itsintrinsic value, amargin of safetyexists, which makes it suitable for investment.
Graham wrote that investment is most intelligent when it is most businesslike. By that he meant that the stock investor is neither right nor wrong because others agreed or disagreed with him; he is right because his facts and analysis are right.14Grahams favorite allegory is that ofMr. Market, a fellow who turns up every day at the stock holders door offering to buy or sell his shares at a different price. Usually, the price quoted by Mr. Market seems plausible, but occasionally it is ridiculous. The investor is free to either agree with his quoted price and trade with him, or to ignore him completely. Mr. Market doesnt mind this, and will be back the following day to quote another price. The point is that the investor should not regard the whims of Mr. Market as determining the value of the shares that the investor owns. He should profit from market folly rather than participate in it. The investor is best off concentrating on the real life performance of his companies and receiving dividends, rather than being too concerned with Mr. Markets often irrational behavior.15
Graham was critical of the corporations of his day for obfuscated and irregularfinancial reportingthat made it difficult for investors to discern the true state of the businesss finances. He was an advocate ofdividendpayments to shareholders rather than businesses keeping all of their profits asretained earnings. He also criticized those who advised that some types of stocks were a good buy at any price, because of the prospect of sustained stock price growth, without a good analysis of the businesss actual financial condition. These observations remain relevant today.16
According toThe Snowball, after his sons death, Graham had an affair with the deceaseds girlfriend Marie Louise Malou Amingues (who was several years older than his son17) and used to travel toFrancefrequently to visit her. He later separated from his wife, Estey, after she refused his offer to split their residence six months each year betweenNew YorkandFrance. Amingues was content to live with Graham without marriage.18
On September 21, 1976, Graham died inAix-en-Provence, France, at the age of 82.
His contributions spanned numerous fields, one of which was fundamental value investing.
Graham is considered the father of value investing,1and his two books,Security AnalysisandThe Intelligent Investor,defined his investment philosophy, especially what it means to be a value investor. Arguably, his most famous student wasWarren Buffett, who is consistently ranked among wealthiest persons in the world.19According to Buffett, Graham used to say that he wished every day to do something foolish, something creative, and something generous.20And Buffett noted, Graham excelled most at the last.21
While many value investors have been influenced by Graham, his most notable investing disciples includeCharles Brandes, as well asWilliam J. Ruane, Bert Olden,Irving KahnandWalter J. Schloss. In addition, Grahams thoughts on investing have influenced the likes ofSeth KlarmanandBill Ackman.2223
Alongside his revolutionary work in investment finance, Graham also made significant contributions toeconomic theory. Most notably, he devised a new basis for both U.S. and global currency.24
Storage and Stability: A Modern Ever-normal Granary
, New York & London, McGraw-Hill Book Company. 1944
Benjamin Graham, The Memoirs of the Dean of Wall Street
; Graham, Benjamin (1917). Some Calculus Suggestions by a Student.
. The American Mathematical Monthly, Vol. 24, No. 6.
, Benjamin (1943). The Critique of Commodity-Reserve Currency: A Point-by-Point Reply.
; Graham, Benjamin (1946). The Undistributed Profits Tax and The Investor.
(1947). National Productivity: Its Relationship to Unemployment-in-Prosperity.
; Graham, Benjamin (1962). Some Investment Aspects of Accumulation Through Equities.
(1962). The Commodity-Reserve Currency Proposal Reconsidered. In Yeager, Leland B. (ed.).
. Cambridge, MA: Harvard University Press. pp.184214.
Warren BuffettCharlie Munger, two investors notable for their adherence tovalue investing
8 Brilliant Lessons From The Investor That Taught Warren Buffett Everything He Knows.
The Motley vestment Greats: Ben Graham. April 17, 2009.
that, I must confess here that I feel little emotional loyalty to the Jewish people from whom I sprung. Graham, Benjamin; Chatman, Seymour Benjamin.
Benjamin Graham: The Memoirs of the Dean of Wall Street
Grego, Gabriele (December 8, 2014).The Jewish Origins of Value investing.
It also should be pointed out that most value investors, including Benjamin Graham,Seth KlarmanBruce BerkowitzBruce GreenwaldLawrence TischandJoel Greenblatt, are Jewish.
Bloomberg,How Benjamin Graham Revolutionized Shareholder Activism. May 17th, 2013.
New York Times, August 16, 1998 Gretchen Morgenson Market Watch MARKET WATCH; A Time To Value Words of Wisdom
New York Times, January 2, 2000 Business Section Humbling Lessons From Parties Past By BURTON G. MALKIEL BENJAMIN GRAHAM, co-author of Security Analysis,long ago put his finger on the most dangerous words in an investors vocabulary: This time is different. Burton G. Malkiel is an economics professor at Princeton University and the author of A Random Walk Down Wall Street (W.W. Norton).
Amazon: Editorial Reviews Analysis is the bible of fundamental analysis. Originally published in 1934, the tome systematically lays bare the science of security analysis.
AbeBooks.com as value investing never goes out of style, neither does the value investors bible, Security Analysis, by Benjamin Graham and David L. Dodd, which has withstood the test of time as well or better than any investment book ever published.
Warren Buffett, Preface to the Fourth Edition, in Benjamin Graham, The Intelligent Investor, 4 ed., 2003.
The Intelligent Investor p.524 (Revised Ed 2006)
Benjamin Graham, The Intelligent Investor, 4 ed., 2003, Chapter 20.
The Economist,Benjamin Graham: Figuring it out. July 7th, 2012.
Financial Analysts Journal, November/December 1976. (Reprinted on page x of the preface to revised Fourth Addition of The Intelligent Investor.)
Seth Klarman – Video Conference with the Ben Graham Centre for Value Investing 2009 – ValueWalk.
These Are The 12 Books That Bill Ackman Has All His Analysts Read.
Bloomberg,Benjamin Grahams Clever Idea for Averting Currency Wars. February 28th, 2013.
, 1E. New York and London: McGraw-Hill Book Company, Inc.
, 2E. New York and London: McGraw-Hill Book Company, Inc.
, 3E. New York: McGraw Hill Book Company, Inc.
, 4E. New York: McGraw-Hill Book Company, Inc.
, 2E revised. Harper&Brothers, New York, 292 pp
, 4E revised. Harper&Row, Publishers, New York, 340 pp
Storage and Stability: A Modern Ever-normal Granary
Benjamin Graham, the memoirs of the dean of Wall Street
The Rediscovered Benjamin Graham selected writings of the wall street legend, byJanet Lowe.
Heilbrunn Center at the Columbia Business School
Wikipedia articles with WorldCat-VIAF identifiers
This page was last edited on 8 November 2019, at 14:51