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).
BENJAMIN GRAHAMThe Reservoir plan is an engineering mechanism applied to the field of economics, and in its essence it has nothing to do with democracy or any other political philosophy.
More Benjamin Graham Quotes
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The genuine investor in common stocks does not need a great equipment of brain and knowledge, but he does need some unusual qualities of character
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There is no reason to feel any shame in hiring someone to pick stocks or mutual funds for you. But there’s one responsibility that you must never delegate. You, and no one but you, must investigate whether an adviser is trustworthy and charges reasonable fees.
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The utility, or intrinsic value of gold as a commodity is now considerably less than in the past; its monetary status has become extraordinarily ambiguous; and its future is highly uncertain.
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While enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster
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Never buy a stock because it has gone up or sell one because it has gone down.
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there is a tendency in part of Wall Street people to pay excessive attention to the most recent figures and the present financial picture.
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In the old legend the wise men finally boiled down the history of mortal affairs into a single phrase: ‘This too will pass.’
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Unusually rapid growth cannot keep up forever; when a company has already registered a brilliant expansion, its very increase in size makes a repetition of its achievement more difficult.
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In other words, the market is not a weighing machine, on which the value of each issue is recorded by an exact and impersonal mechanism, in accordance with its specific qualities.
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Buy not on optimism, but on arithmetic.
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By refusing to pay too much for an investment, you minimize the chances that your wealth will ever disappear or suddenly be destroyed.
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I quickly convinced myself that the true key to material happiness lay in a modest standard of living which could be achieved with little difficulty under almost all economic conditions.
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Instead of passing blithely over into that Promised Land, flowing almost literally with milk and honey, it may be our destiny to wander a full 40 years or more in the wilderness of doubt and divided sentiments.
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The function of the margin of safety is, in essence, that of rendering unnecessary an accurate estimate of the future.
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Price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal.
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Rather should we say that the market is a voting machine, whereon countless individuals register choices which are the product partly of reason and partly of emotion.
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A speculator gambles that a stock will go up in price because somebody else will pay even more for it.
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The intelligent investor shouldn’t ignore Mr. Market entirely. Instead, you should do business with him- but only to the extent that it serves your interests.
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A defensive investor can always prosper by looking patiently and calmly through the wreckage of a bear market.
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Wall Street has a few prudent principles; the trouble is that they are always forgotten when they are most needed.
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The existence of such a war chest might go far to strengthen our prestige and frighten off any would be assailant.
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In the short-run, the market is a voting machine – reflecting a voter-registration test that requires only money, not intelligence or emotional stability – but in the long- run, the market is a weighing machine.
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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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Both individual skill (art) and chance are important factors in determining success or failure.
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The investor should be aware that even though safety of its principal and interest may be unquestioned, a long term bond could vary widely in market price in response to changes in interest rates.
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The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). The intelligent investor is a realist who sells to optimists and buys from pessimists.
BENJAMIN GRAHAM