If you study securities analysis in an academic institution or on Wall Street, you will study Benjamin Graham. Ben Graham was an economist, business professor and investor. He has been called the father of value investing.

His book, “Analysis of Values”, was published in 1934 and is a required text for students of values ​​analysis. And his 1949 book, “The Intelligent Investor,” has been described by Warren Buffett as the best investment book ever written.

In fact, most people know Graham as Warren Buffett’s mentor. Buffett is the only student to have earned an A + from Graham at Columbia University. (As an interesting curiosity, the Harvard Business School rejected Buffett’s application for admission in one of the most brazen decisions since the Red Sox sold Babe Ruth to the Yankees.)

Graham used what has become a famous metaphor called “Mr. Market” to explain how the stock market works. It is probably still the best way to understand how stocks are trading and what it means to you as an investor.

Let’s say you own a business and have a partner. His name is “Mr. Market”. Your business is good. It has given you a high return on what you have invested in the business. The only thing is that your partner, Mr. Market, is a strange guy. It is very emotional. Some days he is very euphoric and other days he is very depressed. I suppose today we would describe her condition as manic-depressive.

Mr. Market has a curious habit. Every day he comes to the office and offers to sell him his share of the business or buy his. However, due to your bad mood, if you are elated on a particular day, you want a very high price for your share. On the other hand, if he’s in a bad mood, he’s willing to sell himself for a pittance.

The interesting thing about Mr. Market is that he doesn’t seem to care if you choose to buy his interest or sell yours. Your feelings are not hurt. You can do whatever you want. It is completely up to you. He just keeps coming into the office every day, offering to buy or sell at wildly different prices. It is always the same good business as always. That does not change. It’s just that, depending on your mood, some days Mr. Market is excited about the business and other days he’s very pessimistic.

Since you know what the business is worth, you can listen to Mr. Market’s offer every day and decide if his offer is a good one or if you want to decline it. Although it is difficult to get used to Mr. Market’s moods, he is actually a great business partner.

That is exactly the way you should view the stock market. Pick your favorite business to be one of 10,000 publicly traded stocks. Look at the stock charts in the newspaper and note the annual high and low price for that stock. You will find that there can be a dramatic difference between the maximum and the minimum during a single year. The business has not changed. It’s only Mr. Market’s mood that changes.

This is how some great investors like Ben Graham, Warren Buffett and Joel Greenblatt of the world have made fortunes. They understand how the stock market works. They seek to buy partial interests (stocks) in good deals (a business with a high return on capital) when Mr. Market is willing to sell their interests at a bargain price.

There is no reason why you can’t do the same.

(c) Larry Holmes