Charles Brandes on Investing Lessons from Benjamin Graham

To view a video of this interview, go here.

Charles Brandes

Charles Brandes is Chairman of the Brandes Investment Management’s five-member Executive Committee where he shares responsibility for driving strategic decisions and monitoring implementation of the firm’s vision and objectives. Prior to founding Brandes in 1974, he was an acquaintance of Benjamin Graham, widely considered the father of the value investing approach.

Dan Richards interviewed Charles Brandes on September 17, 2010

Brandes is associated very closely with the work of Benjamin Graham, the Columbia professor who is considered the founder of value investing; among his students was Warren Buffett.  I want to ask about some of the things that you learned from Graham.  How did you first meet Professor Graham?

It was happenstance.  He walked into the office that I was working in and wanted to buy a particular stock, which I bought for him.  This was at the very beginning of my career, in the early 1970s, when I had a chance to meet the guru of not only value investing, but of security analysis.

After that initial meeting did you have further contact with Ben Graham? 

I did.  I asked him if I could come and talk about investing with him, and he said sure.  So I had a few meetings with him at his apartment.

If someone were to ask you, having met with Ben Graham a few times, if there were two or three key things that you took away from those conversations, what would be first on the list?

First, I asked what the definition of investing is and what is really true about investing.  He explained that most people, when they are thinking short-term, are thinking about stock markets.  They are thinking about forecasting quarterly earnings.  He said everybody calls that investing, but when you really think about it, it is speculation on short-term price movements which has nothing to do with investing. 

So, he pointed out to me what real investing was, which is taking a long term view on the true worth of companies.

What was second on the list in terms of the key takeaways from Ben Graham?

Stock prices and bond prices fluctuate in value a lot more than the actual underlying value of the security that you own.  The reason for that is fear and greed, human behavior.

So the notion is that stock prices in the short term don't necessarily really reflect the true underlying value of companies.

That's correct.

Was there a final lesson that you could point to from Ben Graham?

This does not change:  If you think fundamentally, and you are conservative, and you understand how wealth is actually produced – not by the stock market – but by businesses, you are doing a fundamentally right thing that not everybody is doing.  You don't have the competition so you can be successful that way.