Security Analysis
by Benjamin Graham (Author), David L. Dodd (Author)
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A road map for investing that I have now been following for 57 years. (From the Foreword by Warren E. Buffett) First published in 1934, Security Analysis is one of the most influential financial books ever written. Selling more than one million copies through five editions, it has provided generations of investors with the timeless value investing philosophy and techniques of Benjamin Graham and David L. Dodd. As relevant today as when they first appeared nearly 75 years ago, the teachings show more of Benjamin Graham, "the father of value investing", have withstood the test of time across a wide diversity of market conditions, countries, and asset classes. This new sixth edition, based on the classic 1940 version, is enhanced with commentary from some of today's leading Wall Street money managers. These masters of value investing explain why the principles and techniques of Graham and Dodd are still highly relevant even in today's vastly different markets. The contributor list includes: - Seth A. Klarman, president of The Baupost Group, LLC and author of Margin of Safety - James Grant, founder of Grant's Interest Rate Observer, general partner of Nippon Partners - Jeffrey M. Laderman, twenty-five year veteran of BusinessWeek - Roger Lowenstein, author of Buffett: The Making of an American Capitalist and When America Aged and Outside Director, Sequoia Fund - Howard S. Marks, CFA, Chairman and Co-Founder, Oaktree Capital Management LP - J. Ezra Merkin, Managing Partner, Gabriel Capital Group - Bruce Berkowitz, Founder, Fairholme Capital Management - Glenn H. Greenberg, Co-Founder and Managing Director, Chieftain Capital Management - Bruce Greenwald, Robert Heilbrunn Professor of Finance and Asset Management, Columbia Business School - David Abrams, Managing Member, Abrams Capital Featuring a foreword by Warren E. Buffett (in which he reveals that he has read the 1940 masterwork "at least four times"), this new edition of Security Analysis will reacquaint you with the foundations of value investing - more relevant than ever in the tumultuous 21st century markets. Produced and published by Echo Point Books & Media, an independent bookseller in Brattleboro, Vermont. ©1934, 1962, 1988, 2009 The McGraw-Hill Companies, Inc. (P.) show lessTags
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Member Reviews
A hedge fund manager I know has a great way of describing the difference between growth and value investors: The growth-oriented manager will see a company with a current cash flow level of, say, one dollar and get excited about the possibility it will increase to five dollars in the near future, while the value-oriented manager will get excited if she can buy that dollar now for only fifty cents.
The latter description is a perfect example of the way Graham and Dodd espouse looking at the investment world; the difference between purchase price and intrinsic value is the investor’s “margin of safety”. The writing in this volumen is occasionally ponderous and not all parts of it have aged well since its original publication in show more 1934—see Graham’s The Intelligent Investor for a more recent treatment of this area—but the book remains “ground zero” for any serious student of stock and bond valuation. It truly deserves to be called a classic. show less
The latter description is a perfect example of the way Graham and Dodd espouse looking at the investment world; the difference between purchase price and intrinsic value is the investor’s “margin of safety”. The writing in this volumen is occasionally ponderous and not all parts of it have aged well since its original publication in show more 1934—see Graham’s The Intelligent Investor for a more recent treatment of this area—but the book remains “ground zero” for any serious student of stock and bond valuation. It truly deserves to be called a classic. show less
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, show more I hope they are already familiar with much of what Graham and Dodd write here. If from no other source, from [b:The Intelligent Investor|106835|The Intelligent Investor (Collins Business Essentials)|Benjamin Graham|https://d.gr-assets.com/books/1409602421s/106835.jpg|102974] by the same authors. That book is much more general and easy to digest.
Some quotes from the book
The most general advice of all:
About trust in the management (Norwegian Vardia is an ongoing example of this):
About making those really great deals:
About people trying to convince by complicating things. I will paraphrase Warren Buffett - don't invest in something you don't understand:
About trusting advisors absolutely:
About being using cash as an indicator of success rather than the numbers reported:
About skepticism towards earning reports:
One that is very relevant to people tricked into buying stock in the dot com bubble:
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, show more I hope they are already familiar with much of what Graham and Dodd write here. If from no other source, from [b:The Intelligent Investor|106835|The Intelligent Investor (Collins Business Essentials)|Benjamin Graham|https://d.gr-assets.com/books/1409602421s/106835.jpg|102974] by the same authors. That book is much more general and easy to digest.
Some quotes from the book
The most general advice of all:
"The future is often no respecter of statistical data."
About trust in the management (Norwegian Vardia is an ongoing example of this):
"When 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 appear."
About making those really great deals:
"Obviously 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 apart."
About people trying to convince by complicating things. I will paraphrase Warren Buffett - don't invest in something you don't understand:
"Because figures are used in this process, people mistakenly believe that it is “mathematically sound.”"
About trusting advisors absolutely:
"... if the adviser knew whereof he spoke he would not need to bother with a consultant’s duties."
About being using cash as an indicator of success rather than the numbers reported:
"We 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 profits."
About skepticism towards earning reports:
"The 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 disease."
One that is very relevant to people tricked into buying stock in the dot com bubble:
"Buying 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."show less
History of Financial Advice Collection. In Security Analysis, Benjamin Graham and David Dodd lay out their core philosophy of “value investing.” The book—probably the most influential endorsement of a “fundamental” approach to investment analysis—is clearly presented as an attempt to learn the lessons of the speculative hype and excess of the late 1920s, and to return to the common-sense basics of determining good-value investments. Central to Graham and Dodd’s approach is a company’s “earning power,” which “must imply a fairly confident expectation of certain future results.” From earning power can be derived a measure of “intrinsic value”—Graham and Dodd’s mantra, though one that they outline show more pragmatically: the security analyst “needs only to establish either that the value is adequate … or else that the value is considerably higher or considerably lower than the market price. For such purposes, an indefinite and approximate measure of the intrinsic value may be sufficient.” In making this estimate, the “intricacies of corporate accounting and financial policies” provide the security analyst with “unbounded opportunities for shrewd detective work.” show less
Dodd, D. (Author)
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Benjamin Graham was a seminal figure on Wall Street and is widely acknowledged to be the father of modern security analysis. As the founder of the value school of investing, Graham influenced such subsequent investment gurus as Warren Buffett, Mario Gabelli, John Neff, Michael Price, and John Bogle. His timeless Security Analysis and The show more Intelligent Investor are still considered the "bibles" for both individual investors and Wall Street professionals. Benjamin Graham grew up in New York City and graduated from Columbia University, at whose Graduate School of Business he taught from 1928 to 1957. show less
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- Canonical title
- Security Analysis: Principles and Technique; Security Analysis
- Original title
- Security Analysis
- Original publication date
- 1934
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- Reviews
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- ISBNs
- 35
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- ASINs
- 29