Benjamin Graham Quotes (1894-1976)

“Nothing in finance is more fatuous and harmful, in our opinion, than the firmly established attitude of common stock investors regarding questions of corporate management. That attitude is summed up in the phrase: "If you don't like the management, sell your stock." [...] The public owners seem to have abdicated all claim to control over the paid superintendents of their property.”

“A story that was passed down from Ben Graham illustrates the lemminglike behavior of the crowd: "Let me tell you the story of the oil prospector who met St. Peter at the Pearly Gates. When told his occupation, St. Peter said, “Oh, I’m really sorry. You seem to meet all the tests to get into heaven. But we’ve got a terrible problem. See that pen over there? That’s where we keep the oil prospectors waiting to get into heaven. And it’s filled—we haven’t got room for even one more.” The oil prospector thought for a minute and said, “Would you mind if I just said four words to those folks?” “I can’t see any harm in that,” said St. Pete. So the old-timer cupped his hands and yelled out, “Oil discovered in hell!” Immediately, the oil prospectors wrenched the lock off the door of the pen and out they flew, flapping their wings as hard as they could for the lower regions. “You know, that’s a pretty good trick,” St. Pete said. “Move in. The place is yours. You’ve got plenty of room.” The old fellow scratched his head and said, “No. If you don’t mind, I think I’ll go along with the rest of ’em. There may be some truth to that rumor after all."”

“In his first edition of Security Analysis, back in 1933, Graham expressed disdain for Wall Street's near-obsession with earnings in determining the value of a public company. For Graham, book value was a better guide. ...Bill Graham was right. ...We took the largest 1,500 companies... for the 25-year period ended Dec. 31, 1994. ...We calculated returns for the 20% of stocks with the lowest and highest price-to-book ratios. ...[I]t was no contest. ...If you had invested $10,000 in the lowest... it would have returned $364,000... This more than doubled the return of the market as a whole... an equally weighted market index provided... $163,000. ...[S]tocks that sold at the handsomest premiums to book value... ended up with a miserable $92,000, about 55% of the market's return and only one-fourth ...the lowest price-to-book group. ...[E]motion favors the premium priced stocks. They are fashionable. They are hot. ...Emotion overrides logic time after time.”

“Ben Graham was a truly formidable mind, and he also had a clarity in writing. And, we've talked over and over again about the power of a few simple ideas thoroughly assimilated. ... that happened with Graham's ideas, which came to me indirectly through Warren — but also some directly from Graham. ... And, by the way, Buffett was the best student Graham had in 30 years of teaching at Columbia. ... Buffett became way better than Graham. That is a natural outcome. ... Newton said that, "If I've seen a little further than other men, it's by standing on the shoulders of giants." ... Warren may have stood on Ben's shoulders, but he ended up seeing farther. And, no doubt, somebody will come along in due course and do a lot better than we have.”

“Tom [Knapp] was a chemistry major at Princeton before the war; when he came back... he was a beach bum. And then one day he read that Dave Dodd was giving a night course in investments at Columbia. Tom took it on a non-credit basis, and he got so interested... that he enrolled at Columbia Business School where he got the MBA... He took Dodd's course again, and took Ben Graham's course. ...35 years later ...I found him on the beach ...he owns the beach!”