Quotes from Benjamin Graham

The longer the bull market lasts the more severely investors will be affected with amnesia; after five years or so, many people no longer believe that bear markets are possible.

Today's investor is so concerned with anticipating the future that he is already paying handsomely for it in advance. Thus what he has projected with so much study and care may actually happen and still not bring him any profit. If it should fail to materialize to the degree expected he may in fact be faced with serious temporary and perhaps even permanent loss.

Objective tests of managerial ability are few and far from scientific. In most cases the investor must rely upon a reputation which may or may not be deserved.

Security analysis does not assume that a past average will be repeated, but only that it supplies a rough index to what may be expected of the future. A trend, however, cannot be used as a rough index; it represents a definite prediction of either better or poorer results, and it must be either right or wrong.

Hence the greater part of the impressive market record for that period was based on a change in investors' and speculators' attitudes rather than in underlying corporate values.

The trend is, in fact, a statement of future prospects in the form of an exact prediction.

Analysis is concerned primarily with values which are supported by the facts and not with those which depend largely upon expectations.

The analyst's conclusions must always rest upon the figures and upon established tests and standards.

What have we learned? The market scoffs at Graham's principles in the short run, but they are always revalidated in the end. If you buy a stock purely because its price has been going up—instead of asking whether the underlying company's value is increasing—then sooner or later you will be extremely sorry. That's not a likelihood. It is a certainty.

As Graham puts it, "while enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster.

What's needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.

Be sure to compare the footnotes with those in the financial statements of at least one firm that's a close competitor, to see how aggressive your company's accountants are.

Toda la infelicidad humana tiene un mismo origen: no saber estar tranquilamente sin hacer nada en una habitación.

you will be wiser to form your own ideas of the value of your holdings, based on full reports from the company about its operations and financial position.

High valuations entail high risks.

However, the risk of paying too high a price for good-quality stocks—while a real one—is not the chief hazard confronting the average buyer of securities. Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions. The purchasers view the current good earnings as equivalent to "earning power" and assume that prosperity is synonymous with safety.

We shall dismiss these with the observation that their work does not concern "investors" as the term is used in this book.

It is our view that stock-market timing cannot be done, with general success, unless the time to buy is related to an attractive price level, as measured by analytical standards. Similarly

Graham's definition of investing could not be clearer: "An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return."1 Note

To supply an 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.

you must deliberately protect yourself against serious losses; you must aspire to "adequate," not extraordinary, performance.

La felicidad de quienes ansían la popularidad depende de los demás; la felicidad de los que persiguen el placer fluctúa con estados de ánimo que no pueden controlar; sin embargo, la felicidad de los sabios surge de sus propios actos libres. Marco Aurelio

By the time everyone decides that a given industry is "obviously" the best one to invest in, the prices of its stocks have been bid up so high that its future returns have nowhere to go but down.

You are neither right nor wrong because people agree with you.