Benjamin Graham

"Nearly everyone interested in common stocks wants to be told by someone else what he thinks the market is going to do. The demand being there, it must be supplied."

"The value of the security analyst to the investor depends largely on the investor's own attitude. If the investor asks the analyst the right questions, he is likely to get the right—or at least valuable— answers."

"Readers of this book, however intelligent and knowing, could scarcely expect to do a better job of portfolio selection than the top analysts of the country. But if it is true that a fairly large segment of the stock market is often discriminated against or entirely neglected in the standard analytical selections, then the intelligent investor may be in a position to profit from the resultant undervaluations."

"Good management are rarely overcompensated to an extent that makes any significant difference with respect to the stockholder's position. Poor management are always overcompensated, because they are worth less than nothing to the owners."

"Unusually rapid growth cannot keep up forever; when a company has already registered a brilliant expansion, its very increase in size makes a repetition of its achievement more difficult."

"Wall Street has a few prudent principles; the trouble is that they are always forgotten when they are most needed."

"Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions."

"Investment is most intelligent when it is most businesslike."

"Do not let anyone else run your business."

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

"In the short-run, the market is a voting machine - reflecting a voter-registration test that requires only money, not intelligence or emotional stability - but in the long-run, the market is a weighing machine."

"[Shorter variant:] In the short run, the market is a voting machine but in the long run, it is a weighing machine."

"A story that was passed down from Ben Graham illustrates the lemminglike behavior of the crowd: "Let me tell you the story of the oil prospector who met St. Peter at the Pearly Gates. When told his occupation, St. Peter said, “Oh, I’m really sorry. You seem to meet all the tests to get into heaven. But we’ve got a terrible problem. See that pen over there? That’s where we keep the oil prospectors waiting to get into heaven. And it’s filled—we haven’t got room for even one more.” The oil prospector thought for a minute and said, “Would you mind if I just said four words to those folks?” “I can’t see any harm in that,” said St. Pete. So the old-timer cupped his hands and yelled out, “Oil discovered in hell!” Immediately, the oil prospectors wrenched the lock off the door of the pen and out they flew, flapping their wings as hard as they could for the lower regions. “You know, that’s a pretty good trick,” St. Pete said. “Move in. The place is yours. You’ve got plenty of room.” The old fellow scratched his head and said, “No. If you don’t mind, I think I’ll go along with the rest of ’em. There may be some truth to that rumor after all.""

"In his first edition of Security Analysis, back in 1933, Graham expressed disdain for Wall Street's near-obsession with earnings in determining the value of a public company. For Graham, book value was a better guide. ...Bill Graham was right. ...We took the largest 1,500 companies... for the 25-year period ended Dec. 31, 1994. ...We calculated returns for the 20% of stocks with the lowest and highest price-to-book ratios. ...[I]t was no contest. ...If you had invested $10,000 in the lowest... it would have returned $364,000... This more than doubled the return of the market as a whole... an equally weighted market index provided... $163,000. ...[S]tocks that sold at the handsomest premiums to book value... ended up with a miserable $92,000, about 55% of the market's return and only one-fourth ...the lowest price-to-book group. ...[E]motion favors the premium priced stocks. They are fashionable. They are hot. ...Emotion overrides logic time after time."

"Ben Graham was a truly formidable mind, and he also had a clarity in writing. And, we've talked over and over again about the power of a few simple ideas thoroughly assimilated. ... that happened with Graham's ideas, which came to me indirectly through Warren — but also some directly from Graham. ... And, by the way, Buffett was the best student Graham had in 30 years of teaching at Columbia. ... Buffett became way better than Graham. That is a natural outcome. ... Newton said that, "If I've seen a little further than other men, it's by standing on the shoulders of giants." ... Warren may have stood on Ben's shoulders, but he ended up seeing farther. And, no doubt, somebody will come along in due course and do a lot better than we have."

"Tom [Knapp] was a chemistry major at Princeton before the war; when he came back... he was a beach bum. And then one day he read that Dave Dodd was giving a night course in investments at Columbia. Tom took it on a non-credit basis, and he got so interested... that he enrolled at Columbia Business School where he got the MBA... He took Dodd's course again, and took Ben Graham's course. ...35 years later ...I found him on the beach ...he owns the beach!"

"You... have to have the knowledge to... make a very general estimate about the value of the underlying businesses. But you do not cut it close. That is what Ben Graham meant by having a margin of safety."

"[T]he secret has been out for 50 years, ever since Ben Graham and Dave Dodd wrote Security Analysis, yet I have seen no trend toward in... 35 years... There seems to be some perverse human characteristic that likes to make easy things difficult."

"There will continue to be wide discrepancies between price and value in the marketplace, and those who read their Graham and Dodd will continue to prosper."

"There are perhaps four points where Graham departs radically from conventional practice: ...The "value" ...is not a short-term price forecast ...The "value" is a medium-term sustainable value for the firm as on on-going operation. ...The future is estimated conservatively, using realistic estimates of earnings, and prudent multipliers ...[O]nly ...purchase when price is substantially below value, thus using a considerable "margin of safety". The security should be sold when price begins to exceed value by a given proportion. ...[P]articularly at times when the market is low, a sufficiently large number of under-priced securities will exist ...This insight is perhaps his most unusual one. ...[U]nderpriced shares almost disappear when the market is historically high, and reappear when it falls."

"Graham strongly felt that market prices could be considerably out of line with values. The reason for this discrepancy he took to be psychological. ...[T]he overall level of the market could go to extremes in either direction, as optimism or pessimism holds sway. ...[F]avored stocks would sell at unduly high prices, while unpopular stocks would sell at unduly low prices."

"Graham's approach is cogent, well argued and has a substantial following among successful investors. There is some modern evidence to support him. It may well be worthwhile to sharpen his methods along modern lines and to test them thoroughly."