Benjamin Graham

1894 -1976, a British born American. He was a teacher, lecturer, investor and economist. His major contribution was the theory of security analysis. He wrote a book title "An intelligent Investor", coauthor with David Dodd, suggesting rationality over impulsive purchase of stocks is essential to profit. He was an iconic to many who practice stock investing such as the most prominent figure warren buffet. "Safety Margin" was invented by him, advocating to purchase stock at price below intrinsic value of the business. For him, stock was not merely a trading instrument , but a channel to own wonderful business. He believe in buying a great business and maintain the ownership of it. He believe in profit by the cashflow generated by the business, rather than speculating for other buyer to bit a higher price to buy the stock. Many who practice such basic concept fair relatively better than those technical investor in stock market throughout the century. The idea of safety margin then turn into a more potent phrase - value investing. Price is what we pay, value is what we get. As long as the value is justify to be above the price paid, it is consider to be a good buy. However, value has a more elusive definition relative to price. There was no "units" for value. The most practical to quantify value is by return of investment. It mean that, the collective cash flow generated now plus cash flow potentially generated in future date will outpace the price we buy the stock today that put into the risk free security *such as government bond, with taking consideration of inflation. That is the most simplified version of value investing.

While the theory and concept might not be the perfect get rich quick formula, but it is a very useful principle to keep by investor. The scope of variable in reality is much more wider than we discussed previously in order to complete the formula. Some of it are much more complicated and qualitative such as investors sentiment, political event, social factors, technological cycle and so on. And many of those are required long experience which only can be harvest by mistake and times. It a rather a keep you continuously learning formula than a simple answer to rich answers. It is how he do it, and it is how his disciple did it. Warren buffet, one of his most prominent disciple has proved his theory is very powerful. Powerful enough to make him the most successful investor in the world. At least in term of money amount he able to profit from.