Value & Special Situations
Benjamin Graham
Insist on a margin of safety and treat price as separate from value.
Benjamin Graham is called the father of value investing. He was a famous teacher, and his most famous student was Warren Buffett. He wrote two well-known books, ‘Security Analysis’ and ‘The Intelligent Investor’, that people still read today. His big idea was simple: a share is not just a number on a screen - it is a small piece of a real business. He always insisted on safety, telling investors to pay far less than a thing is worth.
The method
Graham taught people to read a business calmly instead of chasing prices. First, work out roughly what a business is truly worth. Then buy only when the price is far below that worth, leaving a big ‘margin of safety’ to protect you from mistakes and bad luck. He said to treat the market like a moody partner (Mr. Market) whose prices you use, not obey, and to lean on simple rules and a patient temperament so your feelings never decide.
The record
Graham invested and ran a fund long ago, mostly in America, and did well over many years, especially by hunting deep bargains. But he is remembered far more as a great teacher and thinker than for one famous winning streak. His ideas, and the students he shaped, are his real record.
Where they were wrong
Graham lived in a different time. Some of his cheapest bargains - ‘net-nets’, where a business sold for less than its own cash - have become very rare today, because so many people now search for them. His strict, careful rules could also make him miss wonderful growing companies that never looked cheap on his numbers. This is exactly why his students Buffett and Munger later shifted toward buying great-quality businesses at fair prices, rather than only cheap ones.
Studies
8- Study 01Margin of SafetyNever pay close to what a thing is worth - leave a big gap, so you stay safe even when you turn out to be wrong.Read this study →
- Study 02Mr. MarketThe market’s price is an offer, not a judgement - a moody servant to use at the extremes, never a master to obey.Read this study →
- Study 03Price Is Not ValueWatch the slow, true weight of a business - not the loud, fast votes of the crowd - because in the long run the scale always wins.Read this study →
- Study 04Defensive vs EnterprisingBe honest about how much careful effort you will really give - then take the matching path fully, and never the hard path lazily.Read this study →
- Study 05Net-NetsPay far below the plain, countable stuff inside a business - but count it honestly, ask why it is cheap, and never trust a single bargain alone.Read this study →
- Study 06Investment vs SpeculationBefore you spend a rupee, ask honestly: am I owning a real business for the long run, or just guessing where the price goes next?Read this study →
- Study 07Rules Over FeelingsDecide your plan while you are calm and follow it while you are scared, so your feelings never get to hold the steering wheel.Read this study →
- Study 08The Patient TemperamentOn a platform where the crowd keeps running both ways, the calm one who holds steady - not the cleverest one - reaches the train.Read this study →
Primary sources
full register →Read Benjamin Graham in their own words. We reproduce none of it - these are the real things to go to.
Security Analysisbook
The 1934 textbook that founded the discipline of analysing securities from the financial statements. - available wherever books are sold - please buy the book
The Intelligent Investorbook
Benjamin Graham's classic on treating the market as a moody servant and buying with a margin of safety. - available wherever books are sold - please buy the book