📖Benjamin Graham

Company Size

🌿 Intermediate★★★★★

Restrict investments to large established companies whose size provides inherent stability and market resilience.

💬

The company should have annual sales of at least $100 million for an industrial company.

— _The Intelligent Investor_，1949

🏠 Everyday Analogy

Investing is like choosing a restaurant for a meal—you would opt for established, well-known eateries with bustling business and high customer traffic, rather than newly opened small shops. Companies with annual revenues exceeding $100 million are akin to market-proven, reputable restaurants, possessing sufficient resilience to risks and a stable operational foundation.

📖 Core Interpretation

For defensive investors, companies of sufficient size should be selected.
💎 Key Insight：Graham favored large companies because size correlates with stability, diversified revenue, and access to capital markets. Smaller companies are more vulnerable to competitive disruption, management missteps, and economic shocks. For defensive investors, the size criterion is a simple but effective risk filter.

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❓ Why It Matters

Large companies are more stable, possess greater resources, and are better equipped to withstand challenges.

🎯 How to Practice

Establish minimum size criteria to filter out overly small companies.

🎙️ Master's Voice

In the short run, the market is a voting machine but in the long run, it is a weighing machine.
Graham's famous metaphor: short-term prices reflect popularity; long-term prices reflect value. Patience is rewarded.

⚔️ Practical Guide

✅ Decision Checklist

  • Am I thinking short-term or long-term?
  • Am I focused on value?
  • Can I wait for the weighing machine?

📋 Action Steps

  1. Think in years, not days
  2. Focus on intrinsic value
  3. Wait for value to be recognized

🚨 Warning Signs

  • Short-term focus
  • Popularity-based investing
  • Impatience

⚠️ Common Pitfalls

✕Scale standards need to be adjusted for inflation.
✕Small companies can also be good investments.

📚 Case Studies

1
Net-Current-Asset Bargains (1934)
Graham invested in very small firms selling below net current asset value, often ignored by institutions.
✨ Outcome：Many such tiny companies liquidated or recovered, producing substantial gains and validating his preference for smaller, statistically cheap stocks.
2
GEICO Investment (1948)
Graham bought a large stake in relatively small, fast-growing insurer GEICO when it was still obscure.
✨ Outcome：GEICO became a much larger, highly profitable company, generating one of Graham-Newman’s best long-term returns and illustrating the payoff from smaller growth franchises.

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