Benjamin Graham, born in London in 1894, was the son of an importer. His family relocated to the United States during his early years, aiming to establish an import enterprise. Despite facing significant adversity, including the loss of his father and the family’s savings in the 1907 financial crisis, Graham excelled academically and went on to attend Columbia University.
Upon graduation, he was offered a teaching professorship at Columbia but chose instead to enter the financial world, starting his career at Newburger, Henderson, and Loeb on Wall Street as a chalker. His keen analytical skills and financial acumen quickly became apparent, leading to his rapid ascension within the company. By the remarkably young age of 25, Graham had achieved partner status and was earning an annual income exceeding half a million dollars – a staggering sum in the 1920s.
Unsatisfied with his success, Graham, along with fellow broker Jerome Newman, established his own investment partnership in 1926 which thrived for thirty years until his retirement in 1956. Simultaneously, Graham began sharing his knowledge as a finance professor at Columbia University, teaching evening classes.
The stock market crash of 1929, known as “Black Monday,” nearly destroyed Graham financially. His fledgling partnership managed to survive the national crisis by selling nearly everything they owned and receiving assistance from friends who had fared better. Additionally, Graham’s wife returned to teaching dance to help sustain the company. This experience taught him crucial lessons about financial risk management, which he later shared with his readers.
In 1934, Graham co-authored the classic work “Security Analysis” with David Dodd, introducing the concept of intrinsic value investing and offering prudent investment practices. This book, which remains in print to this day, is filled with valuable insights and instructions on successful common stock investing using prudent practices. It introduced the concept of intrinsic value investing and provided timeless wisdom on purchasing stocks at prices below their true value.
The Graham-Newman partnership continued its impressive run until 1956, maintaining a stellar record of never losing their clients’ money. The firm’s performance was remarkable, achieving annual returns of 20 percent during a period when the S&P 500 averaged 12.2 percent per year.
Graham’s role as a professor at Columbia led to a fortuitous meeting with a young student named Warren Buffett, whom Graham later hired upon graduation. Buffett, now a legendary billionaire investor, continues to acknowledge Graham as his investing mentor and guru. Together, Graham and Buffett identified the potential in the insurance company GEICO, an investment that has generated substantial wealth for both Buffett’s Berkshire Hathaway and Graham’s heirs.
In 1948, Graham and Newman acquired GEICO outright, but regulatory constraints prohibiting investment firms from owning insurance companies forced them to convert it to a public company and distribute shares to their partnerships’ investors.
Graham’s literary contributions to the field of investing continued with the publication of “The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel” in 1949, just a few years before his retirement. This work, often referred to as the Bible of Value Investing, has never gone out of print.
After enjoying two decades of retirement, Benjamin Graham, the legendary investor, teacher, and author, passed away in 1976. His influence on the field of security analysis and his reputation as the “Father of Security Analysis” had endured for more than eight decades, cementing his place in the annals of financial history.
