The world’s greatest investors: Benjamin Graham

Legendary investor Benjamin Graham liked nothing more than a "cigar butt" stock, one you could get one last puff from.

Dr Matthew Partridge
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published
in Features

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Benjamin Graham's The Intelligent Investor was a best-seller

Born in London in 1894, his family moved to New York when he was one year old. He studied at Columbia University, and was offered several academic posts after he graduated at the age of 20, but took a job as a messenger in the bond department of Wall Street firm Newburger, Henderson & Loeb. Within six years he was a partner.

In 1923 he left to manage money for private clients. Five years later he began teaching an evening class at Columbia Business School, which become the foundation for his 1934 investment classic, Security Analysis. This was later followed by the 1949 bestseller The Intelligent Investor, which has been reprinted in various editions.

What wasthe strategy of Benjamin Graham?

He advised investors to focus on companies that traded on low multiples of price to earnings (ie, that were cheap compared to the profits they were making). But he particularly liked companies trading at less than the value of their net assets, which he called "cigar butts" (you might be able to get one last puff out of them).

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GEICO was trading at rock bottom, but Graham saw that the firm was cutting costs through selling by post, and it was also selling to low-risk customers. By 1956, GEICO's shares had risen nearly tenfold. Graham was also a key influence on Warren Buffett. Indeed, Buffett who Graham taught as a graduate student at Columbia was invited to take over Graham-Newman in 1956.

What other advice did he have for investors?

Dr Matthew Partridge
Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri

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