Benjamin Graham on stock investing

Although there are good and bad companies, there is no such thing as a good stock; there are only good stock prices, which come and go.

~ Benjamin Graham

Benjamin Graham on "Mr. Market"

Imagine that in some private business you own a small share that cost you a thousand dollars.  One of your partners, who's named Mr. Market, is very obliging indeed.  Every day he tells you what he thinks your interest is worth and furthermore either offers to buy you out or sell to you an additional interest on that basis.  Sometimes his idea of value seems plausible and justified by business developments and prospects, as you know them.  Often, on the other hand, Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly. 

~ Benjamin Graham, The Intelligent Investor (1949)

(As quoted by Dan Ferris, "The Secret to Beating Mr. Market': A Lesson in Value Investing," Stansberry Investor Hour, 6:40 mark, April 10, 2023)

Benjamin on stock market forecasts

If I have noticed anything over these past 60 years on Wall Street, it is that people do not succeed in forecasting what's going to happen in the stock market.

~ Benjamin Graham

Benjamin Graham on how to measure investment success

The best way to measure your investment success is not by whether you're beating the market, but by whether you've put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.

~ Benjamin Graham

Seth Klarman on Benjamin Graham

As the father of value investing, Benjamin Graham, advised in 1934, smart investors look to the market not as a guide for what to do, but as a creator of opportunity.

~ Seth Klarman

Benjamin Graham on the investor's biggest problem

The investor's chief problem - even his worst enemy - is likely to be himself.

~ Benjamin Graham

Benjamin Graham on investment performance

To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.

~ Benjamin Graham

Benjamin Graham on emotion and investing

Individuals who cannot master their emotions are ill-suited to profit from the investment process.

~ Benjamin Graham

Benjamin Graham on risk

Successful investing is about managing risk, not avoiding it.

~ Benjamin Graham

Benjamin Graham on market timing

Yet we can not avoid the conclusion that the most generally accepted principle of timing is that purchases should be made only after an upswing has announced itself, is basically opposed to the essential nature of investment.  Traditionally the investor has been the man with patience and the courage of his convictions who would buy when the harried or disheartened speculator was selling.  If the investor is now to hold back until the market itself encourages him, how will he distinguish himself from the speculator and wherein will he deserve any better than the ordinary speculator's fate?

~ Benjamin Graham, Security Analysis, p. 15

(As cited by Dan Ferris, Stansberry Investor Hour, 11:30 mark, January 21, 2021.)

Benjamin Graham on the intelligent investor

The intelligent investor is a realist who sells to optimists and buys from pessimists.

~ Benjamin Graham, The Intelligent Investor

Ben Graham on IPOs in bull markets

Somewhere in the middle of the Bull market the first common-stock flotations make their appearance. These are priced not unattractively, and some large profits are made by the buyers of the early issues. As the market rise continues, this brand of financing grows more frequent; the quality of the companies becomes steadily poorer; the prices asked and obtained verge on exorbitant. One fairly dependable sign of the approaching end of a bull swing is the fact that new common stocks of small and nondescript companies are offered at prices somewhat higher than the current level for many medium-sized companies with a long market history. The heedlessness of the public and the willingness of the selling organization to sell whatever may be profitably sold can have only one result - price collapse.

~ Benjamin Graham, dean of the value school

Western Cattle in Storm
1898

Jim Cramer on Benjamin Graham during the Tech Bubble (2000)

[Internet-related companies] are the only ones worth owning right now. [These "winners of the new world"] are the only ones that are going higher consistently in good days and bad.

You have to throw out all the matrices and formulas and texts that existed before the Web... If we use any of what Graham and Dodd teach us, we wouldn't have a dime under management.

~ Jim Cramer, as hedge fund manager, as quoted by Jason Zweig in the commentary of The Intelligent Investor, February, 2000

Jim Grant on Benjamin Graham's bullishness in 1932

It might have been for penance that [Benjamin] Graham, with the editorial assistance of David L. Dodd, began to write his magnum opus, "Security Analysis"—for penance and for money. Certainly, there was no money coming in from the money-management business. Graham's fund was down by 20% in 1929, by 50% in 1930 and by 16% in 1931. In 1932, the year the Dow bottomed at 41.22, he managed to achieve a kind of moral victory by losing a mere 2%. Still, there was but 30 cents remaining of each dollar entrusted to his stewardship at the peak only three years before.

Graham was in the throes of composition in the spring of 1932, though he was writing not for his book publisher, McGraw-Hill, but for Forbes Magazine. Under his byline, starting in the issue dated June 1, appeared a three-part series headed, "Is American Business Worth More Dead Than Alive?" To judge by the valuations then prevailing on the New York Stock Exchange, the answer was "yes." More than a third of all listed industrial companies changed hands at less than the companies' own net current assets. In other words, the business values of these companies—as distinct from their net cash and other liquid assets—was worth less than zero.

Graham treated this astonishing fact not only with wonder—who could have dreamt it?—but also with a well-reasoned measure of indignation. In the long-vanished boom, companies had raised billions of dollars from the public. Now they were liquid, while the public was struggling to pay the rent and put food on the table. The only rational way to explain the existence of so many cheap stocks, Graham proposed, was that the market, in its wisdom, was discounting operating losses for years to come. But if that were the case, he asked, "should not the stockholder demand liquidation before his money is thus dissipated?"

Well, the market wasn't wise, he judged. It was an ass. How could it be otherwise when the people who bought and sold—especially those who sold—refused even to look at balance sheets? "Much of the past year's selling of stocks has been due to fear rather than necessity," Graham wrote in Forbes. "If these timid holders were thoroughly aware that they were selling out for only a fraction of the liquid assets behind their share, many of them might have acted differently. But since valuation has come to be associated exclusively with earning power, the stockholder no longer pays any attention to what his company owns—not even its money in the bank."

If "earning power" was the boomtime cry, "losing power" was the motto of the bust. "Is it true," Graham posed, "that one out of three American businesses is destined to continue losing money until the stockholders have no equity remaining? That is what the stock market says in no uncertain terms."

And Graham answered his own question: "In all probability [the market] is wrong, as it has always been wrong in its major judgments of the future. The logic of Wall Street is proverbially weak. It is hardly consistent, for example, to despair of the railroads because the trucks are going to take most of their business, and at the same time to be so despondent over the truck industry as to give away shares in its largest units for a small fraction of their liquid capital alone."

~ Jim Grant, "My Hero, Benjamin Grossbaum," speech given in Manhattan before the Center for Jewish History, November 15, 2007