Benjamin Graham 1894-1976

A young Benjamin Grossbaum left his birthplace of London, England with his family around the turn of the 20th century Ben’s father -  Isaac M. Grossbaum – had decided to open a New York branch of his ornamental porcelain business. The family sailed to New York aboard the Lucania, and were processed through Ellis Island. Their new life under the name of Graham, however, was turned upside-down when Grossbaum Senior unexpectedly passed away aged 35 in 1903, leaving Mrs Grossbaum to bring up Ben and his two brothers alone.

Ben’s mother Dora had no head for business or, perhaps, no time. The family firm soon went bust leaving Dora without a livelihood with which to bring up Ben and his older brothers Leon and Victor. After a failed attempt to produce an income running a boarding house, Mrs Grossbaum bought an odd lot of US Steel stock, using a margin account. The account was wiped out during the financial crisis of 1907.

Such an introduction to the stock market might have put most people off, but not Ben. After graduating from high school towards the top of his class, he went on to Columbia University where he graduated second in his class in 1914, despite working full-time for most of his course of study in order to help support his family. Ben was courted by many academic departments of Columbia wanting him to be a lecturer, but a meeting with the Dean convinced him to work in the business world and so Ben started his Wall Street career with the brokerage firm Newburger, Henderson & Loeb.

As an assistant in the Bond dept, Ben had to prepare descriptions of bonds for the brokerage’s daily recommendations, a job he was obviously good at because, after only a few weeks, they gave him the task of writing the recommendation letter itself. When war broke out, the markets closed for some months; when they reopened, Ben was given all kinds of jobs to pick up the slack, allowing him to gain a thorough understanding of the investment world. Later, he was sent out as a bond salesman to customers and, in a roundabout way, learned that his skills were of better use in the statistical field. Ben on his own actually ended up becoming the statistical “department” for Newburger. Thus began his career as an “analyst”

In 1915, Ben calculated the value of a large mining holding company, Guggenheim Exploration which was set to dissolve its operations and return assets to shareholders.  Guggenheim held shares in various copper mining companies, and Ben calculated these holdings separately in total to be worth somewhat more than a single share of Guggenheim Exploration. Thus it was possible to make an arbitrage profit by purchasing shares of Guggenheim and shorting the associated mining stocks. This turned out to be a successful trade for the brokerage and its associates, and so Ben’s early reputation was solidified.

It was this early success that encouraged Benjamin Graham to buy stocks that appeared to be underpriced while at the same time selling overpriced stocks. This strategy, supported with a large sum of money from a friend, was successful and made them both a great deal of money. In 1920, Ben made partner at N, H & L.