Common Sense Investing The Papers of Benjamin Graham

Common Sense Investing: The Papers of Benjamin Graham

Common Sense Investing: The Papers of Benjamin Graham 

Category: Stock

Author: Benjamin Graham 

Language: English

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“Let me close with a few words of counsel from an 80 year-old veteran of many a bull and many a bear market. Do those things as an analyst that you know you can do well, and only those things. If you can really beat the market by charts, by astrology, or by some rare and valuable gift of your own, then that’s the row you should hoe. If you’re really good at picking the stocks most likely to succeed in the next twelve months, base your work on the endeavor. If you can foretell the next important development in the economy, or in the technology, or in consumers’ preferences, and gauge its consequences for various equity values, then concentrate on that particular activity. But in each case you must prove to yourself by honest, no-bluffing selfexamination, and by continuous testing of performance, that you have what it takes to produce worthwhile results.

If you believe – as I have always believed – that the value approach is inherently sound, workable, and profitable, then devote yourself to that principle. Stick to it, and don’t be led astray by Wall Street’s fashions, its illusions, and its constant chase after the fast dollar. Let me emphasize that it does not take a genius or even a superior talent to be successful as a value analyst. What it needs is, first, reasonable good intelligence; second, sound principles of operation; third, and most important, firmness of character.

But whatever path you follow as financial analysts, hold on to your moral and intellectual integrity. Wall Street in the past decade fell far short of its once praiseworthy ethical standards, to the great detriment of the public it serves and of the financial community itself. When I was in elementary school, more than 70 years ago, we had to write various maxims in our copybooks. The first on the list was: “Honesty is the best policy.” It is still the best policy.”

Benjamin Graham – 1974

Table of Contents- Common Sense Investing The Papers of Benjamin Graham

Investment vs. Speculation  4
The Unsound Logic of Wall Street   9
The Individual Investor and the Market  13
Portfolio Management Approach   17
The Past and Future of Common Stocks   18
A Lesson from the Past   22
Security Analysis as a Science  26
The Fallacy of Efficient Markets   32

Common Stock Categories   36
Analysis of Financial Statements   38
Valuation of Common Stocks   40
Alternative Investments   54
Special Situations   55
Common Stocks and Inflation   61
The Beta Coefficient   63
Pitfalls of Discounted Cash Flows   63
Dividends and Tax Matters   65
Threats to Equity Values  84
Shareholders and Management  85
U.S. Steel Case Study  90
Prologue  96

About the author

Benjamin Graham ( born Benjamin Grossbaum; May 8, 1894 – September 21, 1976) was a British-born American economist and professional investor. Graham is considered the father 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. Graham had many disciples in his lifetime, a number of whom went on to become successful investors themselves. Graham’s most well-known disciples include Warren Buffett, William J. Ruane, Irving Kahn and Walter J. Schloss, among others. 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. Graham also taught at the UCLA Anderson School of Management.

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