Quote

When somebody asserts that a stock has an earning power of so much, I am sure that the person who hears him doesn't know what he means, and there is a good chance that the man who uses it doesn't know what it means.

Benjamin Graham

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Benjamin Graham
Age: 82 †
Born: 1894
Born: May 8
Died: 1976
Died: September 21
Economist
Financier
Investor
University Teacher
Writer
London
England
Persons
Stock
Person
Somebody
Mean
Sure
Much
Chance
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Asserts
Men
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More quotes by Benjamin Graham

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The only thing you should do with pro forma earnings is ignore them.
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High valuations entail high risks.
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Good managements produce a good average market price, and bad managements produce bad market prices.
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Even defensive portfolios should be changed from time to time, especially if the securities purchased have an apparently excessive advance and can be replaced by issues much more reasonable priced.
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Experience teaches that the time to buy stocks is when their price is unduly depressed by temporary adversity. In other words, they should be bought on a bargain basis or not at all.
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In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.
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We urge the beginner in security buying not to waste his efforts and his money in trying to beat the market. Let him study security values and initially test out his judgment on price versus value with the smallest possible sums.
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The investor's chief problem - and even his worst enemy - is likely to be himself.
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A defensive investor can always prosper by looking patiently and calmly through the wreckage of a bear market.
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The investor with a portfolio of sound stocks should expect their prices to fluctuate and should neither be concerned by sizable declines nor become excited by sizable advances. He should always remember that market quotations are there for his convenience, either to be taken advantage of or to be ignored.
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Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of good business conditions. The purchasers view the good current earnings as equivalent to 'earning power' and assume that prosperity is equivalent to safety.
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Price statistics show clearly that instability in raw-material prices is a prime cause of instability of other prices.
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Successful investing is about managing risk, not avoiding it.
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Buy when most people, including experts, are pessimistic, and sell when they are actively optimistic.
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The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). The intelligent investor is a realist who sells to optimists and buys from pessimists.
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Mr. Market's job is to provide you with prices your job is to decide whether it is to your advantage to act on them. You no not have to trade with hime just because he constantly begs you to.
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Knowledge is only one ingredient on arriving at a stock's proper price. The other ingredient, fully as important as information, is sound judgment.
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Stock speculation is largely a matter of A trying to decide what B, C and D are likely to think-with B, C and D trying to do the same.
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The best values today are often found in the stocks that were once hot and have since gone cold.
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It is worth pointing out that assuredly not more than one person out of a hundred who stayed in the market after after 1925 emerged from it with a net profit and that the speculative losses taken were appalling.
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