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The Margin-of-Safety Value Strategy buys only at prices well below a company's intrinsic value, reducing the risk of loss first. It is the basic form of value investing, and turns Benjamin Graham's financial-safety and valuation criteria into rules.
Born in 1894 in London, he moved to New York with his family at the age of one. His father died early and he grew up in hardship. After graduating from Columbia University in 1914, he went to work on Wall Street.
He lost heavily in the 1929 crash, and from that experience set out a way to treat investing as analysis rather than instinct. His best-known books are Security Analysis (1934, with David Dodd) and The Intelligent Investor (1949).
He ran the Graham-Newman investment firm from 1936 to 1956 and taught for many years at Columbia Business School. Warren Buffett took his class and later worked at Graham-Newman. In 1948 he invested in the insurer GEICO and earned a large return.
He called something an investment only if thorough analysis protected the principal and promised a reasonable return; anything else was speculation. He died in France in 1976.
The market is like a business partner who quotes a different price every day depending on his mood. Buy when he is gloomy and quotes low, sell when he is excited and quotes high. The price is an offer, not a verdict on value.
Intrinsic value cannot be calculated exactly, so buy cheap enough that a wrong estimate still does not lose money. Buy a stock you value at 100 for 60, and you still profit even if the estimate is 20% too high.
Graham left criteria that can be checked with numbers, for people without time to research stocks in depth. This site's scoring follows them.
P/E of 15x or below and P/B of 1.5x or below, and the two multiplied should not exceed 22.5 (the Graham number). If one is a little high, it still passes when the other is low enough.
A current ratio of at least 2x, and debt smaller than equity. A cheap stock with weak finances is not a margin of safety.
Profitable throughout the verifiable period, and paying dividends.
If the market value is below net current assets (current assets minus total liabilities), you are paying less than what would be left if the company were liquidated. These are very rare today, but when found they offer the clearest margin of safety.
This strategy model was independently built by Confluence Zone to quantify the investment philosophy in the works above. It is not an official model created, endorsed or reviewed by Benjamin Graham or any related institution. Last reviewed: 2026-09-29
Related terms: PER · PBR · Debt-to-Equity Ratio · Current Ratio
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