Group members Name Rohit Parad Vikramsingh Kaintura Neha Sahani Aniket Sulakhe Prathmesh Vernekar Chirag Gohil

Roll No. 12115B0002 12115B0006 12115B0026 12115B0033 12115B0041 12115B0046

Benjamin Graham The father of value investing

Benjamin Graham is a British-born American economist and professional investor. He is known as the father of value investing and he is a mentor to warren Buffet. He is also an author of two investment classic books one of them is Security Analysis, which he wrote along with David Dodd, was published in the year 1934 and that has been considered as a bible for serious investors since it was written. And the other one is The Intelligent Investor published in 1949. These are his two most widely acclaimed books. Graham's followers include Warren Buffett, William J. Ruane, Irving Kahn, Walter J. Schloss and others. Buffett, credits Graham for teaching him with a sound intellectual investment framework, and considers him as the second most influential person in his life after his own father. In fact, Graham had such an overwhelming influence on his students that two of his students, Buffett and Kahn, named their sons Howard Graham Buffett and Thomas Graham Kahn after him. Introduction He was born on 9th may 1894 in London. His father was a dealer in china dishes and figurine. His family migrated to U.S when he was just 1 year old. Earlier his family was living a very lavish and luxurious life. But his father passed away in 1903 & their business stumbled and their financial health also started declining. He was good in studies hence he got the scholarship in Columbia university and performed brilliantly. He completed his graduation getting second class marks in the year 1914. As soon as he graduated he was offered a job to become a faculty in three department viz.english, maths & philosophy. He was just 20 years old when he got such an enviable offer to become a faculty. But he refused to do so.

His investment career

In spite of such a nice offer he chose Wall Street over being a faculty. He started as a clerk in a bond trading firm then an analyst and then partner and finally he started his own investment partnership firm. Earlier dealing in securities was just a speculation business but he pioneered the science of investing as against speculation. As hardly some attention was paid on fundamental of the business of the company. Ex. In 1925, in the course of his research he came across some interesting findings. Northen pipeline co. held at least $80 a share in high quality bonds. Northen pipelines stock price at that point of time was $65 a share. Graham exploited this discrepancy by buying the stock and persuading the management to raise the dividend. Three year later he walked away with $110 a share, a return of almost a 70%. But during the crash of 1929-32 he lost 70% of his portfolio but yet with the help of his method he was doing better when market was still pessimistic. From 1936 until his retirement in 1956 Graham Newman Corporation the partnership firm gained almost 20% annually (14.7% after accounting for fees). This was the great performance Wall Street has ever seen when rest of the market was giving 12.2% return. According to him, an investors has two real choices the first one is to make serious commitment in time and energy to become a good investor who spends time on analysing the fundamental of business and company to earns an expected return and if this is not possible for an investor then the other choice is to invest in less risky securities and earn less return. He turned the academic notion of risk=return by saying work=return, the more work you do the more profit and return you enjoy. He explains the difference between speculators vs. investor Not all the people in the stock market are investors. He believes that people should know the fact that whether they are investors or speculators. An investor looks at a stock as a part of a business and the stakeholder as the owner of the business, whereas speculator is the one who plays with expensive piece of paper with no intrinsic value. He says there is always an intelligent speculation and also intelligent investment but one should understand in what he/she is good at.

He also said to divide investment in stocks and bonds. This will help in avoiding market down turn by achieving growth of capital through bonds income. His strategy was to preserve a capital and then try to make it grow. He suggested having 25% to 75% investment in bond varying this on market condition this helps to stop an investor from being a speculator.

His principle Buying a stock in a company is like buying the business Know your investing style Active and passive which can also be explained as defensive an enterprising. Defensive- the one who does not do any research and earns average returns. Enterprising the one who does analysis and hopefully earns higher return.

Use market fluctuation to your advantage- do not panic and sell your stock just because your stock is undervalued. If you have proper research then definitely someday or the other market will correct itself and you will get fair returns. Investing in stocks means dealing with volatility. Instead of running for the exits during times of market stress, the smart investor greets downturns as chances to find great investments. Graham illustrated this with the analogy of Mr. Market, the imaginary business partner of each and every investor. Mr. Market offers investors a daily price quote at which he would either buy an investor out or sell his share of the business. Sometimes, he will be excited about the prospects for the business and quote a high price. Other times, he will be depressed about the businesss prospects and will quote a low price. Because the stock market has these same emotions, the lesson here is that you shouldnt let Mr. Markets views dictate your own emotions or,

worse, lead you in your investment decisions. Instead, you should form your own estimates of the businesss value based on a sound and rational examination of the facts. Furthermore, you should only buy when the price offered makes sense and sell when the price becomes too high. Put another way, the market will fluctuate sometimes wildlybut rather than fearing volatility, use it to your advantage to get bargains in the market or to sell out when your holdings become way overvalued. Always use margin of safety how much return you want as per your analysis, what would be the highest return that company can give and thats how you can reduce risk. Margin of safety is the principle of buying a security at a significant discount to its intrinsic value, which is thought to not only provide high-return opportunities but also to minimize the downside risk of an investment. This concept is very important for investors to note, as value investing can provide substantial profits once the market inevitably re-evaluates the stock and raises its price to fair value. It also provides protection on the downside if things dont work out as planned and the business falters. The safety net of buying an underlying business for much less than it is worth was the central theme of Grahams success. When stocks are chosen carefully, Graham found that a further decline in these undervalued equities occurred infrequently.