Quotes from Benjamin Graham

generally speaking there can be no high-grade obligations of a weak enterprise.

It is the mark of an educated mind to expect that amount of exactness which the nature of the particular subject admits. It is equally unreasonable to accept merely probable conclusions from a mathematician and to demand strict demonstration from an orator.

All of the above brings us back to our conclusion that the investor has no sound basis for expecting more than an average overall return of, say, 8% on a portfolio of DJIA-type common stocks purchased at the late 1971 price level. But even if these expectations should prove to be understated by a substantial amount, the case would not be made for an all-stock investment program.

Se você não tem como prever o comportamento dos mercados, precisa aprender a prever e controlar o seu próprio.

And I suspect that Graham and Dodd have been ignored by those who suffer from the misconception that trying to make serious money requires that one take serious risks.

An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return."1 Note that investing, according to Graham, consists equally of three elements:

1. There should be adequate though not excessive diversification. This might mean a minimum of ten different issues and a maximum of about thirty.†

Without a saving faith in the future, no one would ever invest at all.

Principle for the securities analyst: Nearly every issue might conceivably be cheap in one price range and dear in another.

day trading—holding stocks for a few hours at a time—is one of the best weapons ever invented for committing financial suicide.

Quien se conforme con ganancias seguras, difícilmente llegará a amasar grandes riquezas; quien lo fíe todo a grandes aventuras, frecuentemente quebrará y caerá en la pobreza: es bueno, por lo tanto, proteger las aventuras con los frutos de la certidumbre para que puedan soportar las pérdidas. Sir Francis Bacon

Readers of this book, however intelligent and knowing, could scarcely expect to do a better job of portfolio selection than the top analysts of the country. But if it is true that a fairly large segment of the stock market is often discriminated against or entirely neglected in the standard analytical selections, then the intelligent investor may be in a position to profit from the resultant undervaluations.

Blessed is he who expecteth nothing, for he shall not be disappointed.

Lynch insists that no one should ever invest in a company, no matter how great its products or how crowded its parking lot, without studying its financial statements and estimating its business value.

the practitioner invests in common stocks the same number of dollars each month or each quarter. In this way he buys more shares when the market is low than when it is high, and he is likely to end up with a satisfactory overall price for all his holdings.

The intelligent investor dreads a bull market, since it makes stocks more costly to buy.

The story is simple enough. Some of those in charge set out to get much better than average (or DJIA) results. They succeeded in doing this for a while, garnering considerable publicity and additional funds to manage. The aim was legitimate enough; unfortunately, it appears that, in the context of investing really sizable funds, the aim cannot be accomplished without incurring sizable risks. And in a comparatively short time the risks came home to roost.

But the intelligent investor has no interest in being temporarily right. To reach your long-term financial goals, you must be sustainably and reliably right.

The intelligent investor dreads a bull market, since it makes stocks more costly to buy. And conversely (so long as you keep enough cash on hand to meet your spending needs), you should welcome a bear market, since it puts stocks back on sale.

Through chances various, through all vicissitudes, we make our way…. Aeneid

Capital expenditures are an essential tool for managers to make a good business grow bigger and better. But malleable accounting rules permit managers to inflate reported profits by transforming normal operating expenses into capital assets. As the Global Crossing case shows, the intelligent investor should be sure to understand what, and why, a company capitalizes.

The wisdom god, Woden, went out to the king of the trolls, got him in an armlock, and demanded to know of him how order might triumph over chaos. "Give me your left eye," said the troll, "and I'll tell you." Without hesitation, Woden gave up his left eye. "Now tell me." The troll said, "The secret is, 'Watch with both eyes!'" —John Gardner

The quantitative factors lend themselves far better to thoroughgoing analysis than do the qualitative factors. The former are fewer in number, more easily obtainable, and much better suited to the forming of definite and dependable conclusions.

Besides a cool name and a hot stock, what did Red Hat's investors get? Over the nine months ending November 30, the company produced $13 million in revenues, on which it ran a net loss of $9 million.13 Red Hat's business was barely bigger than a street-corner delicatessen—and a lot less lucrative. But traders, inflamed by the words "software" and "Internet," drove the total value of Red Hat's shares to $21.3 billion by December 9.