Benjamin Graham: Father of Value Investing
Benjamin Graham (1894-1976) is widely regarded as the father of value investing and was the mentor of Warren Buffett. His books Security Analysis (1934) and The Intelligent Investor (1949) laid the foundation for disciplined, research-driven stock analysis.
Always buy at a significant discount to what the business is worth. For net-nets, Graham insisted on paying no more than two-thirds of NCAV.
Imagine the market as an emotional business partner who offers you different prices every day. Use his mood swings to your advantage — buy when he is depressed, sell when he is euphoric.
An investor is someone who, upon thorough analysis, promises safety of principal and an adequate return. Everything else is speculation.
Graham's Track Record
Graham's investment partnership earned roughly 17% annually from 1936 to 1956, substantially outperforming the market. His most famous investment was GEICO, which he bought when it was a small insurance company — it eventually returned over 100x his initial investment.
The Net-Net Strategy
Graham's most powerful strategy was buying stocks trading below their Net Current Asset Value (NCAV). This means paying less for the company than you would receive if it simply liquidated all its current assets and paid off all debts — you get the operating business for free.
Buy Signal: Stock Price ≤ ⅔ × NCAV per Share
Does It Still Work?
A comprehensive study of the London Stock Exchange from 2009-2019 found that Graham net-net portfolios returned 31.19% annually compared to 20.51% for the broader UK index. The strategy works because it requires patience, tolerance for unpopular stocks, and the willingness to buy what others are ignoring.
Use our UK Net-Net Screener to find current Graham opportunities on the LSE and AIM markets.