Reads very much like a textbook, but a must read for anybody considering stepping outside the world of mutual funds and actually investing in individual companies by using a value based approach This book will provide the basic tools on how to evaluate the intrinsic value of a company, which is the first step in determining whether a security is a worthy investment Certainly not an easy read, but well worth the time and effort. I feel like this book should be required reading before anyone is allowed to invest in the stock market I m no investor, but I enjoy keeping up with the markets the same way some baseball fans like digging into stats and nerding out on numbers And that s why I decided to pick up this book and start learning about value investing from a classic source Holy crap, I couldn t put it down and was surprised at just how simple it was Now I do have training and experience as an accountant, so I wasn t worried about jargon or complicated math often than not the math and terms used in the financial industry are employed to turn relatively simple concepts into seemingly complicated and scientific ideas Surprisingly, this book had almost none of that look how smart my financial ideas are type of vibe to it It had very little jargon beyond the very basic stuff you d learn in high school economics I mean there is nothing here but practical advice that anyone should be able to understand risk is unavoidable, diversify, dividends are good, look for intrinsic value but still consider the price of common stocks in your final decision stuff that I think we now take for granted as common sense, but in 1934 was still not lay knowledge Overall, if you re like me and want to learn from the ground up, and are interested in theory, this is the very foundation of contemporary value investment theories Extremely hard to read, but well worth it. A book that really touches the issue in detail, but it is still carrying old facts of 1920s 1940s Hence its broad mention upon railroad issues, public utility is too stretched that I suspect would benefit little to the analysis of popular industries nowadays In my opinion the recent edition of Intelligent Investor does better in updating and put some footnotes to adjust the statements with the now condition In this book, even one of the co author added to this edition humbly admitted that he had not completed reading this book until he were invited to write the chapter And I think this book is too long for outdated information Graham is an interesting author with original ideas and not afraid of challenging other s opinion and bluntly mention them in his book The main purpose of Value Investing is to find securities in discount lower market value than its book value working capital to establish margin of safety in case of default The goal is to maintain investment position, so any profit taking because of increase in principal is best avoided and strive to have continuous annual income instead and only to sell the security when the earning power is likely to diminish or when the price is deemed too high above premium it becomes speculative.I feel hesitated to read big part about bonds to this book but the concept of Value Investing itself lies on a thorough fundamental analysis of the company A clause in bonds indenture, capitalization structure, or warrants attached to bond might affect stock so might as well getting to know them as well.Topics about Cash Flows and analyzing companies working with mostly intangible assets like software comp tech comp would be great complimentary reading to this classic a.k.a outdated book The fact that the depression happened in Graham s time is now considered as only mild recession could probably change the analyses to stricker threshold The concept of Value Investing is great, but the founder himself might experience some inconsistency in doing it Future forecasting and timing on buying are not an action of investment Graham argued in both Intelligent Investor and Security Analysis But I wonder if he just did itIn the spring of 1951, the Dow Jones Industrial Average stood at about 250.Professor Graham suggested his class at Columbia University Business School that maybe the student would benefit from delaying his investing career until after the Dow had completed ITS PREDICTABLE DECLINE to under 200, which had yet to happen in 1951 Warren Buffett declined the advice, and a good thing it was because the Dow did not return to 200 that year or in any year since I had about ten thousand bucks when Professor Graham gave his advice, Buffett told the Wall Street Journal If I had taken his advice, I would probably still have about ten thousand buckspg 287, Introduction to Part III I push myself to finish this book just before my birthday 908 pages gifted to myself Joy Next I had always intended to read Security Analysis, but due to the size of the book over 700 pages , I did not get around to reading it until around 2008 It was well worth the read True, some of the examples are dated, like the emphasis on railroad securities and some old accounting rules, but the underlying principles still apply today.The book emphasizes concepts, methods, standards, principles and logical reasoning, so it works in the current environment, just as it did when Graham and Dodd wrote it in 1934.2008 was a year of financial and real estate crises which lead to many people seeing huge declines in their 401 k plans, causing some to note that the days of buy and hold are over now Graham and Dodd commented on this long ago, noting that the old idea of permanent investments, exempt from change and free from care, is no doubt permanently gone They believed in long term investments, not trading, but still said an investor has to keep an eye on their holdings and can t just buy them and forget about them This advice still holds true today.They also offer valuable advice on issues as diverse as market timing, intrinsic value, market behavior, analyzing a business, using quantitative and qualitative methods to analyze securities, how investment differs from speculation, key issues for fixed investments vs common stocks, the margin of safety principle, the importance of the balance sheet as well as the income statement in analyzing companies, the importance of comparing price to value, and many other concepts that would benefit investors of today.I would highly recommend this book to serious investors, especially value investors who would benefit from receiving guidance from the men who literally wrote the book on value investing. Without a doubt Graham and Dodd were wise men and they would still be wise men That makes this book interesting regardless of age, but it has lost some of its significance Not because they are wrong but because the things they are pointing out is of much less relevance in a world where fixed income securities are not mainstay investments, and where fixed assets are less important to a company s wellbeing than it used to be.So what is left A lot of really wise advice of the general kind see quotes below Unfortunately it s embedded in a very thick book and I wouldn t recommend anyone reading the whole book to pick out those advice unless they are really interested in investments, and in particular value investments and if they are, I hope they are already familiar with much of what Graham and Dodd write here If from no other source, from The Intelligent Investor by the same authors That book is much general and easy to digest.Some quotes from the bookThe most general advice of allThe future is often no respecter of statistical dataAbout trust in the management Norwegian Vardia is an ongoing example of thisWhen an enterprise pursues questionable accounting policies, all its securities must be shunned by the investor, no matter how safe or attractive some of them may appearAbout making those really great dealsObviously it requires strength of character in order to think and to act in opposite fashion from the crowd and also patience to wait for opportunities that may be spaced years apartAbout people trying to convince by complicating things I will paraphrase Warren Buffett don t invest in something you don t understandBecause figures are used in this process, people mistakenly believe that it is mathematically soundAbout trusting advisors absolutelyif the adviser knew whereof he spoke he would not need to bother with a consultant s dutiesAbout being using cash as an indicator of success rather than the numbers reportedWe and other investors today tend to focus on cash flow after capital expenditures free cash flow , instead of earnings, to evaluate the investment merits of a business One advantage of this approach is that it helps shortcut a good many games that management can play in reporting profitsAbout skepticism towards earning reportsThe basing of common stock values on reported per share earnings has made it much easier for managements to exercise an arbitrary and unwholesome control over the price level of their shares Whereas it should be emphasized that the overwhelming majority of managements are honest, it must be emphasized also that loose or purposive accounting is a highly contagious diseaseOne that is very relevant to people tricked into buying stock in the dot com bubbleBuying stock in new or virtually new ventures This we can condemn unhesitatingly and with emphasis The odds are so strongly against the man who buys into these new flotations that he might as well throw three quarters of the money out of the window and keep the rest in the bank With Nearly A Million Copies Sold, Security Analysis Has Been Continuously In Print For Than Sixty Years No Investment Book In History Had Either The Immediate Impact, Or The Long Term Relevance And Value, Of Its First Edition In By , Seventeen Years Past Its Original Publication And Than A Decade Beyond Its Revised And Acclaimed Second Edition, Authors Benjamin Graham And David Dodd Had Seen Business And Investment Markets Travel From The Depths Of Depression To The Heights Of Recovery, And Had Observed Investor Behavior During Both The Calm Of Peacetime And The Chaos Of World War IIThe Prescient Thinking And Insight Displayed By Graham And Dodd In The First Two Editions Of Security Analysis Reached New Heights In The Third Edition In Words That Could Just As Easily Have Been Written Today As Fifty Years Ago, They Detail Techniques And Strategies For Attaining Success As Individual Investors, As Well As The Responsibilities Of Corporate Decision Makers To Build Shareholder Value And Transparency For Those InvestorsThe Focus Of The Book, However, Remains Its Timeless Guidance And Advice That Careful Analysis Of Balance Sheets Is The Primary Road To Investment Success, With All Other Considerations Little Than Distractions The Authors Had Seen And Survived The Great Depression As Well As The Political And Financial Instabilities Of World War II And Were Now Better Able To Outline A Program For Sensible And Profitable Investing In The Latter Half Of The Century Security Analysis The Classic Edition Marks The Return Of This Long Out Of Print Work To The Investment Canon It Will Reacquaint You With The Foundations Of Value Investing Relevant Than Ever In Tumultuous Twenty First Century Markets And Allow You To Own The Third Installment In What Has Come To Be Regarded As The Most Accessible And Usable Title In The History Of Investment Publishing The 6th edition is basically the 1940 2nd edition with a number of chapters, plus the appendix, removed to make room for contemporary commentary The chapters are available as a separate download, nevertheless their omission is unfortunate as many of them are very informative and access to the separate material inconvenient Certainly at least for the Kindle version, where size is not a concern, the omission is inexcusable and doubly so if you examine what it is that they have been left for.The commentaries read like little than extended promotional blurbs and do not really add anything illuminating to the discussion This is seen most amusingly in the final commentary on global investing, a topic understandably absent in the 1940 edition Instead of correcting this shortcoming, a vague essay is offered which mostly rants about the difficulties giving dated examples, in some cases from the 1980s so much for updating Graham to today s markets.More alarmingly, one of the contributors notes that a certain practice is an unacceptable risk for those of us who invest our own money alongside our client The reader cannot fail to compare this statement with one made by Buffett in his commentary to Graham s Intelligent Investor, where he notes that a manager cannot afford to take risks precisely because it s not his money that is at stake, but his client s It only shows how out of touch the editors are with Graham, in character if not in investment strategy.People should not try to improve masterpieces just for the sake of making a new issue And in this case the publisher clearly did not have anything relevant to add If you can, try to get the 2nd edition reprinting instead. I read this book and will be reading The Intelligent Investor as they are the books that shaped Warren Buffett s career This tome is thick and written in the 1920 30s, so it is a bit difficult to read however, a careful reading will help an entrepreneur better understand how people can lie to you with financial statements It was a seminal read for me and an important reading experience.As someone who only invests in private companies and owns no public stocks, I was hoping for a bit data that would be usable Granted, the book does not promise this, but it was the major reason I picked this up If you have the same intentions, you can go straight to Section V Analysis of the Income Account, the Earnings Factor in Common Stock Valuation and Section VI Balance Sheet Analysis, Implications of Asset Values.
Benjamin Graham May 8, 1894 September 21, 1976 was an American economist and professional investor Graham is considered the first proponent of value investing, an investment approach he began teaching at Columbia Business School in 1928 and subsequently refined with David Dodd through various editions of their famous book Security Analysis Disciples of value investing include Jean Marie Evei
- 770 pages
- Security Analysis
- Benjamin Graham
- 12 October 2017 Benjamin Graham