Benjamin Graham
Born in London in 1894 as Benjamin Grossbaum, Graham emigrated to the United States when he was one year old. Graham graduated from Columbia University in 1914 and was offered a teaching position in three different Columbia departments.
Graham's Security Analysis, published in 1934, was the first book to articulate a framework for the systematic analysis of stocks and bonds. Graham later wrote The Intelligent Investor to bring many of the same concepts to the lay investor. Both books should be at the very top of the required reading list for serious value investors.
One of Graham's most successful investments was in the automobile insurer GEICO, where he served as chairman of the board.
One of Graham's favorite investment techniques was to purchase net-current-asset bargains, or net-nets. Net-net were stocks that traded for less than the value of their current assets minus all liabilities.
Graham's students, such as Warren Buffett and Bill Ruane, are among some of the best investors of the past century.
Philip Fisher
Fisher's career spanned 74 years. After training as an analyst, Fisher started his San Francisco-based investment advisory firm in 1931. His classic book on investing, Common Stocks and Uncommon Profits, was first published in 1958.
Fisher said that, "If the job has been correctly done when a common stock is purchased, the time to sell it is almost never." As an example, Fisher first purchased shares of Motorola in 1955 and held them until his death in 2004.
Fisher put all of his potentital investments through 15 step checklist in order to gauge the quality of a company.
According to Fisher, there are only three reasons to sell a stock:
1) If you have made a serious mistake in your assessment of the company;
2) If the company no longer passes the 15 points as clearly as before;
3) If you could reinvest the money in another, far more attractive company.
Warren Buffett
Buffett uses a discounted cash-flow analysis to estimate the fair value of companies.
Unless analysing a business falls within his circle of competence, Buffett does not try to value the business.
Buffett seeks companies with sustainable competitive advantages. (Companies with economic moats.)
Though Buffett believes it's important to work with competent, honest managers, the economics of a business are the most important factor.
Buffett is not swayed by popular opinion.
Since no discounted cash-flow analysis is perfect, Buffett requires a margin of safety in his purchase price.
Rather than diversify and dilute his potential returns, Buffett conccentrates his investments on his best ideas.
Peter Lynch
Lynch obtained his legendary investor status managing the Fidelity Magellan Fund. Under Lynch's leadership, the Magellan fund grew from $20 million in assets to $13 billion and achieved an average total return of 25% per year.
Despite his success as a professional money manager, Lynch believes that average investors have an edge over Wall Street experts and can outperform the market by looking for investment ideas in their daily lives.
The Lynch investment philosophy has four main components:
1. Invest only in what you understand.
2. Do your homework and research the company thoroughly.
3. Focus only on the company's fundamentals and not the market as a whole.
4. Invest only for the long run and discard short-term market gyrations.
Although he is best known for trend-spotting, Lynch's stock-picking approach mirrors that of Warren Buffett.
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