Benjamin Graham is considered the father of financial analysis. Before him, there was nothing like fundamental analysis. Today he is best known for two great books which are considered as Bible of Fundamental Analysis.
The Intelligent Investor and Security Analysis. These two books has changed the life of many investors. There is no investor in the world who has made his fortune in the stock market without reading these two books.
He was also the Guru of Legendry investor Warren Buffet.
Ben Graham was born on May 9, 1894 London. He moved to New York City with his family when he was one year old. After the death of his father, he lived in an extreme poverty. He was a brilliant student and earned a bachelor of science degree from Columbia University in 1914, at the age of 20. Though he was a science graduate and wanted to become a scientist he had a great interest in mathematics and philosophy.
Struggling to get a job in his field he started working at brokerage firm, where his job was to write stocks and bond prices on the messenger board. His pay was 12$ a week.
Working at a brokerage firm his interest started rising for the bonds and stocks. He started writing research reports and soon became the partner in the firm. Even without any business education he was doing wonders in the world of finance. By 1919, at age 25, he was earning an annual salary of $600,000 almost $9 million today.
In 1926, Graham formed an investment partnership with Jerome Newman. It was this firm that hired Buffett some 30 years later. The firm survived the great Depression, World War II and the Korean War.
1929 crash financially ruined Graham. He started rebuilding his fortune and started teaching night courses in finance. With David Dodd, a professor at Columbia, Graham produced what became the classic books on investing. It took them 4 years to complete Security Analysis. The book because a best seller. He became the professor of Finance at Columbia University.
The 1929 crash inspired him to evolve the great Margin of Safety Concept. Which means to buy stocks or bonds below their intrinsic value. This margin of safety helps investors to survive period of recessions. He recommended two methods to have margin of safety.
- Purchase shares when the overall market is trading at low price.
Purchase the stock when it trades below its intrinsic value even though the overall market is not substantially cheap.
Graham suggested investors to apply energy more on the 2nd concept.
In 1949, he published The Intelligent Investor. Warren Buffett describes this book at the best book about investing ever written. Some of Graham’s most famous disciples include Value Investors such as Warren Buffett, Charlie Munger, Philip Fisher, Walter Schloss, Peter Lynch, John Templeton, Mohnish Pabrai, Whitney Tilson, Prem Watsa, Jerome Chazen, and Joel Greenblatt among others.
Abhishek is an Engineer MBA in Finance and Certified Research Analyst. He is an active trader and investor in the stock market since 2010. Follower of the philosophies of Warren Buffet and Peter Lynch in investing and trend following in trading.