Bill Ackman, the founder of Pershing Square Capital Management, recently shared that his investment career was kickstarted by reading the book “The Intelligent Investor” by Benjamin Graham. Interestingly, this same book also played a pivotal role in Warren Buffett’s life and investment philosophy.
In a conversation with tech YouTuber Lex Fridman, Ackman revealed that “The Intelligent Investor” was the first investment book he ever read. Written after the Great Depression and World War II, the book aimed to educate the common man on the importance of distinguishing between price and value in investing. This lesson, according to Ackman, has been a guiding principle throughout his career.
Graham’s book portrays the stock market as a “voting machine” in the short term, driven by speculation and supply-demand dynamics. However, in the long term, the market behaves as a “weighing machine,” providing a more accurate valuation of a company based on fundamentals.
Ackman emphasized the significance of understanding a company’s true value, stating, “If you can define what something’s worth, then you can really take advantage of the market because it’s really here to help you.”
Ackman’s investment philosophy is deeply rooted in the principles he learned from “The Intelligent Investor.” He looks for non-disruptive businesses that he believes will be more valuable and profitable in the long run, even if the stock market were to shut down.
Similarly, Warren Buffett’s investment approach shifted after reading Graham’s book, prompting him to focus on acquiring companies rather than just purchasing stocks. Buffett’s long-term outlook on investing, spanning 10 to 20 years, reflects the influence of Graham’s teachings.
In his conversation with Fridman, Ackman also discussed the factors that signal a company’s potential for significant growth. He highlighted the importance of investing in businesses that he believes will continue to thrive and generate profits over the years, regardless of short-term market fluctuations.
Overall, Ackman’s and Buffett’s experiences with “The Intelligent Investor” showcase the enduring value of foundational investment principles and the importance of understanding a company’s intrinsic value in the ever-changing world of finance.
