Benjamin Graham was born Benjamin Grossbaum on May 8, 1894. He was born in London England to Jewish Parents. His father, Isaac M. Grossbaum, was an importer and moved the family to America when Graham was 1 year old, opening an fledgling importation business. The business did not do very well, with Graham’s father dying shortly after arriving in America and his mother losing most of the family’s savings during an economic crises. Benjamin changed his name from Grossbaum to Graham in his early adulthood in order to fit in on Wall Street.
Graham was an exceptionally gifted student, winning a scholarship to Columbia University, which he graduated from in 1914 at the age of 20 and was invited to teach at the school. However, due to the fact that there was very little income in his family, Graham declined the teaching invitation to seek out a larger income in order to support his family, going to work on Wall Street for the firm of Newburger, Henderson and Loeb, starting at $12 per week.
Graham’s initial duties were as a delivery person and runner. Soon he was hired to write descriptions of bond issues and later was given the job of writing the daily market letter of the firm. It didn’t take too long before he began to show his true genius for financial research and analysis and at the age of 25 became a full partner with the firm, earning over $500,000 a year.
In 1923 Graham formed a an investment partnership with another broker named Jerome Newman around this time, leaving Newburger, Henderson and Loeb and in 1928, he began teaching investment classes at Columbia and continued with his lectures until his retirement in 1956.
Over a period of a few years, he worked with a former Columbia student by the name of David Dodd, using the lessons of his class to write a book title “Security Analysis” which was published in 1934. This book discussed how to evaluate a company by assessing all of its financial statements in order to gain returns without danger of financial losses. This book went on to become the go-to book for most serious investors and continues to be considered the bible of investing. One of Graham’s students was Warren Buffet, who is a renowned investor and a multi-billion dollar entrepreneur. Buffett has admitted that most of his money was made by methodically implementing what was taught in Graham and Dodd’s books.
In 1949 Graham published his second book, “The Intelligent Investor” which was equally, if not even more received with great enthusiasm from investors as the first book. The Intelligent Investor is acclaimed for its easily understood and practical methods of value investing, a subject Graham had been teaching at Columbia Business School for some years. Warren Buffett calls The Intelligent Investor “the best book about investing ever written.”
In both of his books, Graham made the distinction clear to investors between investment and speculation, explaining to his readers as he had explained to his students that an investment operation is one which, upon analysis, guarantees or nearly guarantees an adequate return on the investment. If an operation did not meet this requirement it was deemed speculative.
In his books, Graham wrote that an investment is the most intelligent when it the most businesslike investment. He said that it didn’t matter who agreed with a stock investor, that he is not right or wrong based on how many people agree with him, but rather on how much his facts and analysis are correct.
Graham was often critical of corporations in his day that made it difficult to discern the actual state of the business’s financial status, due to obfuscation and irregular financial reporting. He was also a great advocate of dividends being paid to shareholders, rather than the business keeping all of the profits as retained earnings. Graham often criticized advisors who suggested investors invest in stocks simply on the basis of sustained growth, rather than analyzing the business’s financial status.
Graham is considered today as the father of value investing. Some of his well-known students include Warren Buffett, John templeton, Walter J. Schloss, Peter Lynch, Jerome Chazen, and Joel Greenblatt, just to name a few. Buffett described him as the second most influential person in his life after his own father.
As a matter of fact, Graham had such an impact on his two of his students that they even named their sons after him, Howard Graham Buffett and Thomas Graham Kahn.
Graham passed away on September 21, 1976 at the age of 82, leaving behind a solid legacy as the Father of Security Analysis.