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History has designated Benjamin Graham as the Father of Value Investing. He not only developed the concept but also lived it, both as a practitioner with a remarkable track record and as a professor who profoundly impacted his students.
Father of Value Investing
His research paved the way for today’s stock market analysts by introducing the concept of fundamental analysis and raising awareness of the correlation between stock prices and a company’s intrinsic value.
Without Graham, the prominently sought after designation of Chartered Financial Analyst (CFA) may very well be non-existent.
It was Benjamin Graham who first proposed the idea that financial analysis should be a formalized profession.
Benjamin Graham lived from 1894 to 1976. After excelling as a teenage prodigy at Columbia, he graduated salutatorian and was offered teaching positions in the mathematics, philosophy, and English departments.
He decided instead to pursue a path at which he had no formal education or training: finance.
His career on Wall Street started at the young age of 20 and continued, in one role or another, until his death more than six decades later.
During the stock run-up of the 1920’s – when speculators carelessly tossed their life savings into the market with the certitude of obtaining extraordinary wealth – stock pickers relied on insider chatter and gut instinct as their sources of information.
When looking back on this time, Graham explained how very little attention was given to financial statements: “The figures were not ignored, but they were studied superficially and with little interest.”
Graham was the first to base investment decisions on companies’ financial statements and rely heavily on quantitative data.
Investment vs. Speculation
The crash of 1929 was enough to refortify the commonly held view that only bonds were investments – that stocks were inherently speculative.
Graham disagreed and spent the majority of his career convincing a skeptical public that stocks weren’t just for high-risk gamblers but could be sound investments for anyone.
He defined a speculator as “one who seeks to profit from market movements, without primary regard to intrinsic values,” and an investor as “one who buys only at prices amply supported by underlying value.”
For the last several decades, Benjamin Graham’s leadership has been a voice of reason in an otherwise irrational market.
Mitchell Mauer is the Founder of TheStockMarketBlueprint.com. The Stock Market Blueprint is a site that finds value stocks for investors building long-term wealth. The site’s investment philosophy is anchored in principles established by Benjamin Graham and his most reputable followers over the last 100 years.