Benjamin Graham: What This Womanizer Can Teach You About Investing
by Alexander Green, Investment U Chief Investment Strategist
Friday, September 28, 2012: Issue #1872
The “Father of Security Analysis” wasn’t much of a husband or father. He divorced his first wife in 1937, when divorce was still socially unacceptable, leaving his four children stigmatized.
The next year, he married a young actress. But his interest soon waned and he soon dumped her to marry his secretary. In between, he had so many lovers and affairs that in a new biography The Einstein of Money, the author calls him a “swinger.” When he died in Provence at 87, it was in the arms of his long-time French mistress, whom he’d courted away from his son!
Needless to say, Benjamin Graham was not a family values guy. But he understood a lot about stock values. In fact, he pioneered the field of security analysis and made a fortune for himself in the stock market. Understanding even a little bit about his methods can make you a much better investor.
Graham arrived on Wall Street in 1914, a 20-year-old classicist fresh out of Columbia University. He began to make a name for himself by finding bargain stocks selling for far less than their intrinsic value. He soon put his money to work buying cheap stocks with a high margin of safety. In 1948, for instance, Graham invested a quarter of his firm’s capital in GEICO. It climbed 1,635% over the next eight years.
In 100 Minds That Made the Market, Ken Fisher writes that Graham “hated technical tools like charts and graphs and equally distrusted growth investors’ blind faith in a company’s management, upcoming products and present reputation – those just couldn’t be measured in cold, hard numbers. Instead, Graham relied on earnings and dividends and felt book value – the physical assets of a company – was the basis for making sound investment decisions.”
Graham insisted you should buy a single share of a stock the same way you would buy an entire company. Understand the business. Analyze the balance sheet. Do the math. Forget about the state of the economy or the hot trend of the moment. The only thing that really matters is the health and assets of the business you’re buying, not who’s in the White House or what’s happening at the Fed.
Graham laid out his core principles in Security Analysis, now widely recognized as the bible of value investing and a textbook still used in many college investment courses more than 70 years after it was published. He later distilled this work into The Intelligent Investor, a book for the lay investor that still ranks in Amazon’s top 300 – 62 years after it was first published. In fact, both books sell more copies each year now than when they were originally published, the true sign of an investment classic and a claim few books can make in any genre.
Today Graham is perhaps best known for his famous protégé, Warren Buffett. Buffett took Graham’s principles and used them to become the twentieth century’s best-known investor and one of the world’s wealthiest men.
Buffett still credits Graham for much of his success. “No one ever became poor by reading Graham,” says Buffett.
I can’t imagine a serious stock market investor who wouldn’t profit from studying Graham’s disciplined, common-sense approach. He is rightly viewed as the father of fundamental security analysis. And – given his social life – perhaps the father of much else, as well.
Good Investing,
Alex
Benjamin Graham: What This Womanizer Can Teach You About Investing,Any investment contains risk. Please see our disclaimer.
6 Responses to “Benjamin Graham: What This Womanizer Can Teach You About Investing”
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“Womanizing” and making money seem to go together: I understand that Hugh Hefner is a billionaire, and that Soros has more “fillies’ in his stable than does Churchill Downs!!!
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No wonder: all good things come out of Columbia University: Howard Stern, Barack Obama, Eric Holder, the Manhattan Project…haven’t they ALL contributed to a “better world”???!!!
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Alex, I took a course at UCLA graduate school taught by Ben Graham , have been to his house and read all of his books. I just do not remember anything about his womanizing. I remember just before he dies he said he was going to Italy to catch some sun and then come back to LaJolla and does. I thought he was 76 . IU was wondering where your information came from . I read all your stuff and greatly appreciate your ever up beat attitude. Don Gloisten
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Money from stock market is sheer luck and timing, many times. By constant follow up and looking at broader horizon and staying invested, get astronomical returns, at times.
To get the stimulation, for this exercise, persons like Graham,
Need the constant company of women. I would say that half the credit of Benjamin’s success, should go these women, as well. The younger the women, the greater the kick for Graham. All artists, great rulers, great thinkers, all enjoy the company of women! wealth, wine and women, stimulate, all these persons. No exceptions!
R.Prasanna Venkatesan,
Founder Trustee,
Intellectuals for India.
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Yes Graham was a womanizer, but Buffett only used his techniques till 1966 and then too Buffett did a lot of arbitrage.
Munger is the “Reason” Buffett is a Billionaire, no more no less. Munger informed Buffett about “brands-Great businesses”, “moats”, “competitive advantage’and “float’, although Buffett did have some idea of float before. The best example of float is the Blue chip stamp company which went to zero after 20-25 years but they invested the ‘huge’ cash flow ( present value ) according to Mungers rules and Buffett prospered ie. Sees Candies, Washington Post, Coca Cola etc.
Graham taught Buffet about earnings and cigar butts. This made graham estate worth $3 million in 1976.
YOur article is false and does a total diservice to people. don’t follow graham unless you want lessons on being a womanizer.
BTW, graphs and charts can make you a billionaire in time as long as you can escape captital gains taxes. Ask March Rich ??? trading commodities.
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If you has bought the March 2009 low you would have at least tripled your money. Since most had bailed out and were living in terror they never did this. JP Morgan told the truth-”buy when there is blood in the water”. How could you know when to buy and when the real low was? When the price of OIL bottomed!!! Oil backs the US Federal Reserve Note! Oil will never go to zero but it does go up and down and the Rockefellers run the mess not Warren Buffet. Control oil and you control nations and the currency. John J. McCloy ran most of the 20th century for them. Charts are reality of prices and VERY usefull! Have been for over 400 years.
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