The Intelligent Investor_ The Definitive Book on Value Investing - Benjamin Graham [248]
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Grateful acknowledgment is made for permission to reprint:
“The Superinvestors of Graham-and-Doddsville,” by Warren E. Buffett, from the Fall 1984 issue of Hermes, Magazine of Columbia Business School. Reprinted by permission of Hermes, Magazines of Columbia Business School, copyright © 1984 The Trustees of Columbia University and Warren E. Buffett.
“Benjamin Graham,” by Warren E. Buffett, from the November/December 1976 issue of Financial Analyst Journal. Reprinted by permission of Financial Analysts Federation.
THE INTELLIGENT INVESTOR—Revised Edition. Copyright © 1973 by Benjamin Graham. New material: Copyright © 2003 by Jason Zweig. All rights reserved under International and Pan-American Copyright Conventions. By payment of the required fees, you have been granted the non-exclusive, non-transferable right to access and read the text of this e-book on-screen. No part of this text may be reproduced, transmitted, down-loaded, decompiled, reverse engineered, or stored in or introduced into any information storage and retrieval system, in any form or by any means, whether electronic or mechanical, now known or hereinafter invented, without the express written permission of HarperCollins e-books.
EPub © Edition JUNE 2003 eISBN: 9780061745171
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1 Coauthored with David Dodd and first published in 1934.
2 The Grossbaums changed their name to Graham during World War I, when German-sounding names were regarded with suspicion.
3 Graham-Newman Corp. was an open-end mutual fund (see Chapter 9) that Graham ran in partnership with Jerome Newman, a skilled investor in his own right. For much of its history, the fund was closed to new investors. I am grateful to Walter Schloss for providing data essential to estimating Graham-Newman’s returns. The 20% annual average return that Graham cites in his Postscript (p. 532) appears not to take management fees into account.
4 The text reproduced here is the Fourth Revised Edition, updated by Graham in 1971–1972 and initially published in 1973.
* The two partners Graham coyly refers to are Jerome Newman and Benjamin Graham himself.
† Graham is describing the Government Employees Insurance Co., or GEICO, in which he and Newman purchased a 50% interest in 1948, right around the time he finished writing The Intelligent Investor. The $712,500 that Graham and Newman put into GEICO was roughly 25% of their fund’s assets at the time. Graham was a member of GEICO’s board of directors for many years. In a nice twist of fate, Graham’s greatest student, Warren Buffett, made an immense bet of his own on GEICO in 1976, by which time the big insurer had slid to the brink of bankruptcy. It turned out to be one of Buffett’s best investments as well.
* Because of a legal technicality, Graham and Newman were directed by the U.S. Securities & Exchange Commission to “spin off,” or distribute, Graham-Newman Corp.’s GEICO stake to the fund’s shareholders. An investor who owned 100 shares of Graham-Newman at the beginning of 1948 (worth $11,413) and who then held on to the GEICO distribution would have had $1.66 million by 1972. GEICO’s “later-organized affiliates” included Government Employees Financial Corp. and Criterion Insurance Co.
1 Graham’s anecdote is also a powerful reminder that those