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A look at some Benjamin Graham investments ( Part One )

May 06, 2011
The Dean of Wall Street, Benjamin Graham, was renowned for investing in net working capital stocks. The books Security Analysis and The Intelligent Investor cover this important area.

Although a lot has been written about general net working capital asset investing not many investors have actually scrutinised Graham’s investments. Most value investors know the Geico story, or they’ve heard of Graham’s pursuit of Northern Pipeline management but what about the more ordinary investments?

This is the first article of a series that looks at Ben Graham’s ‘bread and butter’ investments in common stocks as held by the Graham-Newman Partnership. Methods such as work outs and arbitrage will be largely ignored due to the clear lack of information available to scrutinise those types of plays.

Below is a layout of 9 companies as of yearend 31st January, 1946. I have no idea how long these companies were in the portfolio before this time.

Example one, A.D.F Co, shows the increase of Graham’s holding from 1,300 shares to 4,600 shares yet the value of the shares only rose from $ 7,800 to $ 9,200.

Bell Aircraft is amongst the larger investments in common stocks that Graham-Newman made. Again the number of shares held increased whilst the value of the shares held increased by a much lower percentage.

One has to remember also that ’back in the day’ dividend yields were far larger than they are today. In the book ‘Benjamin Graham on Investing’ Graham illustrates plenty of examples with dividend yields of 6-9%. Although written around twenty years previous to the Graham-Newman Partnership large dividends were still a feature of the investing landscape during the 1940’s and 1950’s.

Readers can draw further conclusions regarding Graham-Newman’s investing style in common stocks from the data presented below:

A.D.F Co.
Year EndNumber of SharesValue ( $ )
31-January-19461,3007,800
31-July-19474,6009,200
31-January-19484,60010,925
31-January-19494,6005,750
31-January-19504,6006,325


American Shipbuilding Company
Year EndNumber of SharesValue ( $ )
31-January-19461004,462.50


Bell Aircraft Corporation
Year EndNumber of SharesValue ( $ )
31-January-19463,890126,425
31-July-194712,300152,212
31-January-194812,300221,400


Brewster Aeronautical Corp.
Year EndNumber of SharesValue ( $ )
31-January-194610,00050,000
31-July-194712,10058,988
31-January-194812,1007,562
31-January-194912,6001,008
31-January-195012,6001,008
31-January-195112,600-


Buda Company
Year EndNumber of SharesValue ( $ )
31-January-19462,50077,500
31-July-19474,00067,000
31-January-19484,00052,000
31-January-19493,70039,775
31-January-19504,00045,000
31-January-19514,00054,000
31-January-19524,00056,000
31-January-19534,00057,500


Cuban American Manganese Corporation
Year EndNumber of SharesValue ( $ )
31-January-19461,0005,250


Electric Boat Company
Year EndNumber of SharesValue ( $ )
31-January-19462,20053,075


L.H. Gilmer Company
Year EndNumber of SharesValue ( $ )
31-January-19462,2007,700
31-July-19472,2006,600
31-January-19482,2006,325


Gisholt Machine Company
Year EndNumber of SharesValue ( $ )
31-January-19462004,400
31-July-19472003,225


I am a partner at www.shareladder.com for whom I write a newsletter. Currently the portfolio constructed from the newsletter is up 42% over the last year. The investment principles I follow are mainly derived from the Benjamin Graham school of investing.

About the author:

Liarspoker
Stockbroker @ www.market-swings.com

Visit Liarspoker's Website


Rating: 2.9/5 (7 votes)

Comments

graemew
Graemew - 3 years ago
Graham seems to have lost money on many of the above investments. (Could stock splits have complicated the information above in some cases?) He seems to have bought more on the way down. Since he lost money on most of the above it would seem that this group of investments is not representative.... Could I ask where the above data came from? Thanks for posting this.
Liarspoker
Liarspoker - 3 years ago

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