No. of Recommendations: 8
Thank you, BreckHutHigh,
This blog was unexpectedly touching for me. I understood what Benjamin, as a man, was trying to do, no, needed to do.
A boyhood of financial hardship made a lifelong impact on the adult man. Benjamin Graham grew up to be a man who chose the subway over taxis, 'alleging to myself that [the subway] as quicker' but knowing well that I wanted to save the dollar or so involved.' He also admitted his habit'as a millionaire'of ordering the least expensive entrée on a menu. More profoundly, he never forgot how it felt to lose everything. He knew first-hand the struggle of trying to get by on too little. These experiences kindled his creativity on Wall Street. He invented security analysis and value investing for people like himself and his mother, who wanted their investments to make gains with minimal risk. His essential principle of margin of safety, detailed in The Intelligent Investor, sprang from a boy's ardent wish to be safe, not sorry, after witnessing his mother's lost investment in U.S. Steel.
The margin of safety principle guides investors to choose only stocks that they can buy at a price significantly below their intrinsic value. To determine margin of safety, an investor calculates the difference between a stock's market price and its intrinsic value, as determined by Benjamin Graham's formula. The larger the margin of safety, the greater the cushion that protects the investor from loss. Countless children, and their parents, shop for bargains, but only this exceptional 'small boy''who bought a baseball and used tennis balls at prices well below their value'grew up to devise a timeless investment principle based on this practice. I'm struck with how elegantly margin of safety distills the lessons of fiscal caution Ben Graham learned in his youth.
His granddaughter "distilled" the reason Benjamin Graham was so powerful an artist of margin of safety. It stemmed from love and the need to help his family. And I understand why Warren revered him so.
