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Avoid second-quality issues in making up a portfolio unless they are demonstrable bargains.

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
Second
Issues
Demonstrable
Quality
Portfolio
Making
Portfolios
Bargains
Investing
Avoid
Unless

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The purchase of a bargain issue presupposes that the market's current appraisal is wrong, or at least that the buyer's idea of value is more likely to be right than the market's. In this process the investor sets his judgement against that of the market. To some this may seem arrogant or foolhardy.
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In an ideal world, the intelligent investor would hold stocks only when they are cheap and sell them when they become overpriced, then duck into the bunker of bonds and cash until stocks again become cheap enough to buy.
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Though business conditions may change, corporations and securities may change, and financial institutions and regulations may change, human nature remains the same. Thus the important and difficult part of sound investment, which hinges upon the investor's own temperament and attitude, is not much affected by the passing years.
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Both individual skill (art) and chance are important factors in determining success or failure.
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The only thing you should do with pro forma earnings is ignore them.
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Buy when most people, including experts, are pessimistic, and sell when they are actively optimistic.
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Never mingle your speculative and investment operations in the same account nor in any part of your thinking.
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Never buy a stock immediately after a substantial rise or sell one immediately after a substantial drop.
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Always buy your straw hats in the Winter
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The chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.
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Successful investment may become substantially a matter of techniques and criteria that are learnable, rather than the product of unique and incommunicable mental powers.
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To see how much a company is truly earning on the capital it deploys in its businesses, look beyond EPS to Return on Invested Capital (ROIC).
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Good managements produce a good average market price, and bad managements produce bad market prices.
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The investor's chief problem - and even his worst enemy - is likely to be himself.
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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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The essence of investment management is the management of risks, not the management of returns.
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It is absurd to think that the general public can ever make money out of market forecasts.
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Before you place your financial future in the hands of an adviser, it's imperative that you find someone who not only makes you comfortable but whose honesty is beyond reproach.
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The intelligent investor should recognize that market panics can create great prices for good companies and good prices for great companies.
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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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