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Certainly not an easy read, but well worth the time and effort. The 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 more 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. I read the revised edition which includes post-chapter commentary and footnotes from Jason Zweig.
The commentaries read like little more 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. 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. Graham is an interesting author with original ideas and not afraid of challenging other’s opinion and bluntly mention them in his book.
About Benjamin Graham
So, he purchased this preferred stock, and it’s not the same but it is close to being the same. So, for simplicity’s sake, that’s the probably the best way for you to understand it, but he purchased this, if I remember right, the book value that he purchased the preferred stock at was Narrative and Numbers: The Value of Stories in Business Review $115 a share. If you go back and you look at the book value of the common stock on Goldman Sachs at that particular point in time back in 2008, if I remember, right, it was around $115 a share. So, he locked that in, and then they were paying a 10% dividend on that preferred stock.
I found the added perspective helpful since the original book is quite old. Benjamin Graham’s Intelligent Investor remains relevant. It is used, successfully, as a guide for value investing, despite the hysteria of market sentiment and day-to-day variations, even extreme volatility. For example, I just read a nice article about applying the value investing principles extolled in Intelligent Investor a few weeks ago. It was written in the context of current markets, which is amazing, to be so applicable, despite the passage of decades. Security Analysis by Benjamin Graham and David Dodd is a book like no other. It gives an object view on investing intelligently in all sorts of asset classes.
Much of the text, however, gets caught up in lengthy examples that weigh down this tome. Overall, this book reads well although the Intelligent Investor — also written by Graham and Dodd — provide a more readable roadmap to the central tenets of value oriented investing. Security Analysis is not for the amateur or newbie investor wanna be. That being said, I didn’t understand approximately 63% of it but the parts I did understand seem to me to be investing wisdom at its finest. If you are a seasoned investor, you will want to read this book and refine your skills.
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Warren Buffet studied at Columbia University in New York City in the early 1950s with Graham and Dodd. He learned the concept and adopted the philosophy of value investing. In 1999, Buffet was at an Investment Conference in Sun Valley, Idaho. Buffet was being criticized for not being invested in the dot.com stock market; some felt that he had lost his investment touch and had missed a great market opportunity. At this conference, he stated that he just didn’t understand the dot.com market; this was partly true. What he was really thinking is that this dot.com market was a bubble market and contrary to everything Graham and Dodd had taught him. It is instructive to go back and read financial books written at a time of economic trouble and hardship.
So inherently, there is a lot of volatility involved. More and more people are learning to trade their own stocks online. And there are tons of internet newsletters promoting pump and dump stock schemes… so having good information goes a long way. Since Security Analysis is a 90 year old textbook written by brilliant business professors and fund managers, you know you can trust it… .
Graham sets a very high bar in terms of what it means to be an investor rather than a speculator. I am not sure why it took several years for me to decide to read Security Analysis when I should have pursued this right after reading the Intelligent Investor. In early 2000, I finally decided to read the book and purchased a reproduction of the 1934 edition. I have to admit that while I found the “Survey and Approach” material in Part I very compelling, I started to get the impression that I was dealing with an outdated book by the time I started reading about fixed income securities and railroad bonds. In retrospect, it would have been better to read a later edition of Security Analysis that contained Graham’s experience of the full impact of the Great Depression. I found the book useful but considered The Intelligent Investor to be a far more relevant text for today’s security analyst.
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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. 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. 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 more about value investing from a classic source. 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.
After reading this book, I understood why it was so important to Warren Buffet. I use the methodology described every day, in every investing decision I make. “If this kind of fundamental analysis works so well why isn’t everyone a value investor? ” And the truth is, value investing is almost always emotionally difficult. Fundamental analysis can be safe in the long term, but it might be dangerous from the perspective of a short term technical trader.
If you’re a passive investor, or what Benjamin Graham calls a defensive investor, you might be okay by only reading the “Intelligent Investor.” At least, that’s my opinion. You need to have profound knowledge about investing before starting “Security Analysis.” That’s for sure. I think the book is irrelevant for some types of investors, I definitely think that the “Intelligent Investor,” which is more, let’s call it a more simplified version of “Security Analysis,” that’s important to understand for all investors. A topic that forex comes up a lot about this book, and I get asked this question a lot, “Is that book even still relevant? It’s so out of touch with the current markets today.” And, boy, I’ll tell you, I couldn’t disagree with that idea more. When I look at books today, and new modern versions of this book, I’ll tell you, folks, my opinion is that this book is so relevant today. So, you think about when they would have been writing this, they would have literally been writing this book, right in that timeframe when it gets published in 1934.
It is however a heavy book, both figuratively and literally. It’s doubtful whether you can appreciate all of it without already having some meaningful experience. Probably worth reading multiple times over ones investment career. The bible of value investing, Security Analysis instructs readers on how to invest — rather than speculate — in fixed income and equity securities. The authors appropriately highlight the importance of identifying and investing in good businesses selling at attractive prices relative to their intrinsic valuation.
If an investor does nothing more than read Part I, it is highly unlikely that he or she will be susceptible to the pitfalls that could result in a large permanent https://forexarena.net/ loss of capital. Many investors will be surprised to read that Graham would consider much of what they do to be “speculative” based on Chapter 4.
- If you were looking at the second edition where it’s the full length and all these chapters aren’t cut out, I’m sure it is even deeper into the book.
- Graham also advocated for an investing approach that provides a margin of safety—or room for human error—for the investor.
- There are a couple of ways to accomplish this, but buying undervalued or out-of-favor stocks is the most important.
- The irrationality of investors, the inability to predict the future, and the fluctuations of the stock market can provide a margin of safety for investors.
- Investors can also achieve a margin of safety by diversifying their portfolios and purchasing stocks in companies with highdividend yieldsand lowdebt-to-equity ratios.
- Just to give you an idea of how much he talks about fixed income securities before he even gets to common stock.
Security Analysis is an amazingly in-depth look at equity, debt and almost any other investment you can think of. But if you’re just getting started out in your investing, this book might discourage you. This is a professional-level discussion about how to figure out what securities are worth, so there is a lot of detail that might bog you down if you’re just getting started. I think he purchased about $5 billion worth of preferred stock that yielded a 10% dividend, which just so people understand the simplicity of preferred stock, it works almost identical to a bond.
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So, he’s collecting that dividend, then he has the option to convert it into common stock. And I think he had the hold to preferred, I think the convertibility could occur at five years. The thing for “Security Analysis,” the way it’s written and all the points. I think if you’re an active investor, I think it’s important to understand all these things.
Benjamin Graham was a stock and bond investor who suffered losses as a result of the Great Depression. I think it safe to say that he was a thoughtful man, who obviously wanted to learn from his financial errors. This is the last edition written by Graham and Dodd themselves, and was co-authored with Sidney Cottle. The preface describes this edition as “broadening the portions of the book which deal with trends and growth stocks”. The preface to this edition describes how the title is somewhat misleading, as the book is far more comprehensive in its approach; addressing concepts and principles of investment as well, and not just the analysis of securities. The preface also mentions approaching fixed-value investments using the Spinozian term “from the viewpoint of calamity”. This book has more useful, practical and well reasoned information per page than anything else I’ve read about investing.