NationMaster - Encyclopedia: Benjamin Graham

Benjamin Graham (May 8, 1894 – September 21, 1976) was an influential economist and professional investor. Graham is considered the first proponent of Value Investing, an investment approach he began teaching at Columbia Business School in 1928 and subsequently refined with David Dodd through various editions of their famous book Security Analysis. Well known disciples (students and teaching assistants) of Graham include Jean-Marie Eveillard, Warren Buffett, William J. Ruane, Irving Kahn, Walter J. Schloss, and Charles Brandes. Buffett, who credits Graham as grounding him with a sound intellectual investment framework, described him as the second most influential person in his life after his own father. In fact, Graham had such an overwhelming influence on his students that two of them, Buffett and Kahn, named their sons, Howard Graham Buffett and Thomas Graham Kahn, after him. Image File history File links BenjaminGraham. ... Image File history File links BenjaminGraham. ... is the 128th day of the year (129th in leap years) in the Gregorian calendar. ... 1894 (MDCCCXCIV) was a common year starting on Monday (see link for calendar). ... is the 264th day of the year (265th in leap years) in the Gregorian calendar. ... Year 1976 (MCMLXXVI) was a leap year starting on Thursday (link will display full calendar) of the Gregorian calendar. ... Alan Greenspan, former chairman, United States Federal Reserve. ... A Stock Trader or Stock Investor is a securities professional or firm, who buys and sells securities, such as stocks and bonds. ... Value investing is a style of investment strategy from the so-called Graham & Dodd School. ... Columbia Business School (also known as CBS) is the business school of Columbia University in New York, New York. ... David LeFevre Dodd (1895 - 1988) was an American economist, financial analyst, collegiate educator, author, and close colleague of Benjamin Graham (1894 - 1976) at Columbia University. ... Security Analysis, written by Benjamin Graham and David L. Dodd in 1934, is an influential book on the subject of financial analysis and fundamental analysis. ... Warren Edward Buffett (born August 30, 1930, in Omaha, Nebraska) is an American investor, businessman and philanthropist. ... William J. Ruane (b. ... Irving Kahn is American value investor and, with over 77 years experience in the investment business, one of the oldest financial analysts on Wall Street. ... There are very few or no other articles that link to this one. ... To meet Wikipedias quality standards, this article or section may require cleanup. ...

History

Graham, who was of Jewish descent and whose original last name was Grossbaum, was born in London and moved to New York with his family when he was one year old. Benjamin Graham's parents changed the family name to Graham during World War I, when German-sounding names were regarded with suspicion. After the death of his father and experiencing the humiliation of poverty, he became a model student, graduating from Columbia, as salutatorian of his class, at the age of 20. He received an invitation for employment as an instructor in English, Mathematics, and Philosophy, but took a job on Wall Street eventually starting the Graham-Newman Partnership.^[1] The word Jew ( Hebrew: יהודי) is used in a wide number of ways, but generally refers to a follower of the Jewish faith, a child of a Jewish mother, or someone of Jewish descent with a connection to Jewish culture or ethnicity and often a combination of these attributes. ... â€œThe Great War â€ redirects here. ... In the United States and Canada, the title of salutatorian is given to the second-highest graduate of the entire graduating class of an educational institution. ...

His book, Security Analysis, with David Dodd, was published in 1934 and has been considered a bible for serious investors since it was written.^{[citation needed]} It and The Intelligent Investor published in 1949 (4th revision, with Jason Zweig, 2003), are his two most widely acclaimed books. Warren Buffett describes The Intelligent Investor as "the best book on investing ever written."^{[citation needed]} Security Analysis, written by Benjamin Graham and David L. Dodd in 1934, is an influential book on the subject of financial analysis and fundamental analysis. ... David LeFevre Dodd (1895 - 1988) was an American economist, financial analyst, collegiate educator, author, and close colleague of Benjamin Graham (1894 - 1976) at Columbia University. ... The Intelligent Investor by Benjamin Graham published in 1949, is a widely acclaimed book on investing. ... Year 1949 (MCMXLIX) was a common year starting on Saturday (link will display the full calendar) of the Gregorian calendar. ... Warren Edward Buffett (born August 30, 1930, in Omaha, Nebraska) is an American investor, businessman and philanthropist. ... The Intelligent Investor by Benjamin Graham published in 1949, is a widely acclaimed book on investing. ...

Graham exhorted the stock market participant to first draw a fundamental distinction between investment and speculation. In Security Analysis, he proposed a clear definition of investment that was distinguished from speculation. It read, "An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative."^{[citation needed]} Invest redirects here. ... Speculation involves the buying, holding, and selling of stocks, bonds, commodities, currencies, collectibles, real estate, derivatives or any valuable financial instrument to profit from fluctuations in its price as opposed to buying it for use or for income via methods such as dividends or interest. ...

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, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine (i.e. its true value will in the long run be reflected in its stock price). For other uses, see Stock (disambiguation). ... A stock market or (equity market) is a private or public market for the trading of company stock and derivatives of company stock at an agreed price; both of these are securities listed on a stock exchange as well as those only traded privately. ...

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.^{[citation needed]}

Graham 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 its intrinsic value, a "margin of safety" exists, which makes it suitable for investment. Intrinsic value can refer to: Intrinsic value (finance), of an option or stock. ... Definition Margin of safety (safety margin) is the difference between the intrinsic value of a stock (i. ...

Graham wrote that investment is most intelligent when it is most businesslike, a statement which Warren Buffett regarded as the most important words about investment ever written. Graham said 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.

Graham's favorite allegory is that of Mr. Market, a very obliging fellow who turns up every day at the stock holder's door offering to buy or sell his shares at a different price. Often, the price quoted by Mr. Market seems plausible, but often 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 doesn't 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. Market's often irrational behavior.

Graham was critical of the corporations of his day for obfuscated and irregular financial reporting that made it difficult for investors to discern the true state of the business's finances. He was an advocate of dividend payments to shareholders rather than businesses keeping all of their profits as retained 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 business's actual financial condition. These observations remain extremely relevant today. Historical financial statement Financial statements (or financial reports) are a record of a business financial flows and levels. ... This article is about financial dividends. ... In accounting, retained earnings refers to the portion of net income from a period which is retained by the corporation, rather than distributed to its owners. ...

In recent years, Graham's "Mr. Market" approach has been challenged by Modern Portfolio Theory, as advanced by such proponents as William J. Bernstein, whose book The Intelligent Asset Allocator is a direct challenge to Graham's The Intelligent Investor. Modern Portfolio Theory posits that it is generally impossible for any individual to outwit the market, and is widely taught in American and British business schools. Nevertheless, Graham's approach retains a widespread and dedicated following. Indeed, numerous academic studies, including "Contrarian Investment, Extrapolation, and Risk," "Good news for value stocks: Further evidence on market efficiency," "The Cross Section of Expected Stock Returns," and many others, have proven that value stocks outperform the market over virtually all multi-year periods. Capital Market Line Modern portfolio theory (MPT) proposes how rational investors will use diversification to optimize their portfolios, and how a risky asset should be priced. ... William J. Bernstein is an American financial theorist, known for pioneering research in the field of Modern Portfolio Theory. ...

According to Warren Buffett, Benjamin Graham said that he wished every day to do something foolish, something creative, and something generous.^[2] Warren Buffett said that Graham excelled most at the last.^[3]

Bibliography

Books authored

Security Analysis, written by Benjamin Graham and David L. Dodd in 1934, is an influential book on the subject of financial analysis and fundamental analysis. ... The Intelligent Investor by Benjamin Graham published in 1949, is a widely acclaimed book on investing. ...

Papers

Books about

See also

Warren Edward Buffett (born August 30, 1930, in Omaha, Nebraska) is an American investor, businessman and philanthropist. ... Philip Arthur Fisher (September 8, 1907 â€“ March 11, 2004) was a very successful stock investor best known as the author of Common Stocks and Uncommon Profits (ISBN 0-47111-927-X), a guide to investing that has remained in print ever since it was first published in 1958. ... Value investing is a style of investment strategy from the so-called Graham & Dodd School. ... David LeFevre Dodd (1895 - 1988) was an American economist, financial analyst, collegiate educator, author, and close colleague of Benjamin Graham (1894 - 1976) at Columbia University. ... John Burr Willams (1899 - 1989) was a founder and developer of the fundamentalist theory of asset valuation [1], and was one of the first economists to view stock prices as determined by â€œintrinsic valueâ€. He is best known for his 1938 text The Theory of Investment Value, based on his... A method for determining the current value of a company using future cash flows adjusted for time value. ... Gordon growth model is a variant of the discounted dividend model, a method for valuing a stock or business. ... In the â€œIntelligent Investorâ€, Benjamin Graham describes a formula he used to value stocks. ... William J. Bernstein is an American financial theorist, known for pioneering research in the field of Modern Portfolio Theory. ...

Notes

^ Jason Zweig, on page xi of The Intelligent Investor, Revised Edition.
^ Buffett, Warren E.: "Benjamin Graham", Financial Analyst Journal, November/December 1976.
^ Financial Analysts Journal, November/December 1976. (Reprinted on page x of the preface to revised Fourth Addition of The Intelligent Investor.)
^ Graham and Dodd. 1934. Security Analysis: Principles and Technique, 1E. New York and London: McGraw-Hill Book Company, Inc.
^ Graham and Dodd. 1940. Security Analysis: Principles and Technique, 2E. New York and London: McGraw-Hill Book Company, Inc.
^ Graham et al. 1951. Security Analysis: Principles and Technique, 3E. New York: McGraw Hill Book Company, Inc.
^ Graham et al. 1962. Security Analysis: Principles and Technique, 4E. New York: McGraw-Hill Book Company, Inc.
^ Benjamin Graham. 1937. Storage and Stability: A Modern Ever-normal Granary. New York: McGraw Hill.
^ Graham and Ed. Chatman. 1996. Benjamin Graham, the memoirs of the dean of Wall Street. New York: McGraw Hill.
^ Benjamin Graham 1946. The Undistributed Profits Tax and The Investor. The Yale Law Journal 46(1): 1-18.
^ Benjamin Graham 1962. Some Investment Aspects of Accumulation Through Equities. The Journal of Finance 17(2): 203-214.
^ Benjamin Graham 1947. Money as Pure Commodity. American Economic Review 37(2): 304-307.
^ Benjamin Graham 1943. The Critique of Commodity-Reserve Currency: A Point-by-Point Reply. The Journal of Political Economy 51(1): 66-69.
^ Benjamin Graham 1947. National Productivity: Its Relationship to Unemployment-in-Prosperity. American Economic Review 37(2): 384-396.
^ Benjamin Graham 1917. Some Calculus Suggestions by a Student. The American Mathematical Monthly 24(6): 265-271.

External links

Storage and Stability, plus list of other major works by Graham Image File history File links This is a lossless scalable vector image. ... Wikiquote is one of a family of wiki-based projects run by the Wikimedia Foundation, running on MediaWiki software. ...

Contents

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