The Intelligent Investor

Value investing focuses on buying securities that are priced below their intrinsic value. The concept was first introduced by Graham and his partner David Dodd in their 1934 book Security Analysis and later developed in The Intelligent Investor. While Graham does not explicitly use the term “value investing” in The Intelligent Investor, the principles he lays out in the book became the foundation for what is now encompassed by the term. In contrast to many Wall Street investors who focus on short-term trends and market fluctuations, Graham’s approach emphasizes a long-term strategy rooted in the analysis of a company’s fundamental value. Value investing centers on the principles of margin of safety and intrinsic value.

One of the key principles of value investing is the concept of the margin of safety. Graham argues that investors should purchase stocks only when there is a significant difference between the intrinsic value of the stock and its market price. Graham reminds investors to ground this principle in thorough research, claiming that “to have a true investment there must be present a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience” (520).