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Benjamin Graham is regarded as the most influential of investment philosophers. He was the leading exponent of the value investing school of thought.
Over 20 years (from 1936) the Graham-Newman Corporation achieved an abnormally high performance for its clients:
‘The success of Graham-Newman Corporation can be gauged by its average annual distribution. Roughly speaking, if one invested $10,000 in 1936, one received an average of $2,100 a year for the next twenty years and recovered one’s original $10,000 at the end.” (John Train, Money Masters)
Graham, in 1955, put a slightly different figure on it: ‘Over a period of years we have tended to earn about 20 per cent on capital per year’. (In Janet Lowe, Warren Buffett Speaks)
This is much better than the return available on the market as a whole. For example, Barclays Capital Equity-Gilt Studies show the annual average real (excluding inflation) rate of return on US stocks with gross income reinvested as 7.4 per cent for those years.
Even if we add back average annual inflation of 3.8 per cent to the Barclays’ figures to make them comparable, the Graham-Newman figures are much better than the returns received by the average investor.
According to Graham, market pr……….
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