Benjamin Graham: The Father of Value Investing

Anand Kumar Jha

- An influential economist and professional investor - born on May 8, 1894 in London.- In 1926, Investment partnership with

Jerome Newman & first hand experience of the Crash of 1929.- Published the classic “Security Analysis” with David Dodd in 1934- Taught Warren Buffett at Columbia

University.- In 1949, wrote The Intelligent Investor, the Bible of value investing.- Died in 1976

Who is this Guy?

Dean of Wall Street, Father of Security Analysis and Value Investing

General Advice to Investors

1. Be an investor, not a speculatorDon’t expect to profit from market movements

2. Know the asking price – Understand the difference between Price and Value.

3. Rake the market for bargainsNCAV rule is useful, but rules out most stocksOnly buy when there is a “margin of safety”

4. What’s the stock worth? Graham Formula IV (Intrinsic Value) = E*(2R+8.5)*4.4 / Y

5. Regard corporate figures with suspicion6. Don’t stress out – don’t expect every decision to be

perfect.7. Don’t sweat the math i.e. Smart investing does not

require higher math.

General Advice to Investors8. Rule#1: Diversify with stocks and bonds.

Asset allocation at least 25% bonds, at least 25% stocksIncrease bond allocation if the earnings yield on stocks is less than the yield on high-quality bonds

9. Rule#2: Diversify with a wide variety of stocks.Try to hold at least 30 different stocks

10. When in doubt, stick to quality11. Dividends provide a clue12. Defend your shareholder rights13. Be patient

Be prepared (financially and mentally) for prolonged market downturns

14. Think for yourself!

Growth + Value4 Legendary Investors

• Benjamin Graham– The Father of Security Analysis– Developed the field of “value investing”

• Philip Fisher– Started in 1928, still investing today– “It’s quality that counts”

• Warren Buffett– Berkshire Hathaway– Investing from a “business perspective”

• Peter Lynch– Fidelity Magellan (1977 – 1990)– Invest in “understandable” stocks

Is Graham still relevant???

Thank You…

“There is only one Dean in our profession, if security analysis can be said to be a profession. The reason that Benjamin Graham is undisputed Dean is that before him, there was no profession and after him they began to call it that.” - Adam Smith