Benjamin Graham

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Benjamin Graham (18941976) was an influential economist and professional investor who is today often called "the father of value investing". He is perhaps best known today from frequent references made to him by billionaire investor Warren Buffett, who studied under Graham at Columbia University.

Graham, whose original last name was Grossbaum, was born in London and his family emigrated to the United States when he was a year old. He received his bachelor's degree from Columbia University in 1914.

His book Security Analysis, with David Dodd, was published in 1934 and has been considered a bible for serious investors since it was written. That and The Intelligent Investor (ISBN 0-06-055566-1), written in 1949, were his two most widely acclaimed books. They illustrate the technique of using financial analysis to determine investments that are as absolutely safe as possible with adequate returns. In the short term, the stock market is called a voting machine, but in the long term it is called a weighing machine, and investors who spend time and effort to analyze the financial state of many companies can occasionally discover that a stock or bond is available at a discount to its intrinsic value. This he called the "margin of safety", and stated that investments with a good margin of safety should be purchased, and investments with a small margin of safety should not be purchased. Investments without an adequate return and without safety of principal are speculative, and speculation is treated as a frivolous activity for those with excess money that can afford to be gambled away.

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.

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