Quotes from Benjamin Graham

Why do you suppose the brokers on the floor of the New York Stock Exchange always cheer at the sound of the closing bell—no matter what the market did that day? Because whenever you trade, they make money—whether you did or not.

Santayana: "Those who do not remember the past are condemned to repeat it.

we regard growth stocks as a whole as too uncertain and risky a vehicle for the defensive investor. Of course, wonders can be accomplished with the right individual selections, bought at the right levels, and later sold after a huge rise and before the probable decline.

Obvious prospects for physical growth in a business do not translate into obvious profits for investors. The experts do not have dependable ways of selecting and concentrating on the most promising companies in the most promising industries.

the Danish philosopher Søren Kierkegaard noted, life can only be understood backwards—but it must be lived forwards.

The work of a financial analyst falls somewhere in the middle between that of a mathematician and of an orator.

In the last 20 years the "profitable reinvestment" theory has been gaining ground. The better the past record of growth, the readier investors and speculators have become to accept a low-pay-out policy. So much is this true that in many cases of growth favorites the dividend rate—or even the absence of any dividend—has seemed to have virtually no effect on the market price.

Jeremy Siegel's Stocks for the Long Run (1994)—culminating

The new-era doctrine - that good stocks (or blue chips) were sound investments regardless of how high the price paid for them - was at the bottom only a means of rationalizing under the title of investment the well-nigh universal capitulation to the gambling fever/

Robert Shiller, a finance professor at Yale University, says Graham inspired his valuation approach: Shiller compares the current price of the Standard & Poor's 500-stock index against average corporate profits over the past 10 years (after inflation). By scanning the historical record, Shiller has shown that when his ratio goes well above 20, the market usually delivers poor returns afterward; when it drops well below 10, stocks typically produce handsome gains down the road.

It must never be forgotten that a stockholder is an owner of the business and an employer of its officers. He is entitled not only to ask legitimate questions but also to have them answered, unless there is some persuasive reason to the contrary.

Security analysis, as a study, must necessarily concern itself as much as possible with principles and methods which are valid at all times—or, at least, under all ordinary conditions.

An industrial company's finances are not conservative unless the common stock (at book value) represents at least half of the total capitalization, including all bank debt.3 For a railroad or public utility the figure should be at least 30%.

Graham feels that five elements are decisive.1 He summarizes them as: the company's "general long-term prospects" the quality of its management its financial strength and capital structure its dividend record and its current dividend rate.

The words "large" and "prominent" carry the notion of substantial size combined with a leading position in the industry. Such companies are often referred to as "primary"; all other common stocks are then called "secondary," except that growth stocks are ordinarily placed in a separate class by those who buy them as such. To supply an

No compre nunca una acción inmediatamente después de una subida sustancial, ni tampoco la venda inmediatamente después de una bajada sustancial».

cash from financing activities" on the statement of cash flows in the annual report. They can make a sick company appear to be growing even if its underlying businesses are not generating enough cash—as Global Crossing and WorldCom showed not long ago.

we draw two morals for our readers: Obvious prospects for physical growth in a business do not translate into obvious profits for investors. The experts do not have dependable ways of selecting and concentrating on the most promising companies in the most promising industries.

element of concreteness here, let us suggest that to be "large" in present-day terms a company should have $50 million of assets or do $50 million of business.* Again to be "prominent" a company should rank among the first quarter or first third in size within its industry group.

El mercado es un péndulo que oscila constantemente entre un optimismo insostenible (que hace que las acciones sean demasiado caras) y un pesimismo injustificado (que hace que sean demasiado baratas). El inversor inteligente es un realista que vende a optimistas y compra a pesimistas. E

In our view there is no superior advantage in any fixed pattern of diversification. It is not essential to spread the risk around, in pre-established proportions, so that each of the major categories of American enterprise is included. What is essential is that a reasonable diversity of industries be achieved, so that the investor can feel he has his stake in a fairly good cross section of the economy. p143

Even when the underlying motive of purchase is mere speculative greed, human nature desires to conceal this unlovely impulse behind a screen of apparent logic and good sense

Nearly everyone interested in common stocks wants to be told by someone else what he thinks the market is going to do. The demand being there, it must be supplied.

The existence of such a war chest might go far to strengthen our prestige and frighten off any would be assailant.