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Title: Security Analysis by Sidney Cottle, Roger F. Murray, Frank E. Block, Sisney Cottle ISBN: 0-07-013235-6 Publisher: McGraw-Hill Trade Pub. Date: 01 January, 1988 Format: Hardcover Volumes: 1 List Price(USD): $59.95 |
Average Customer Rating: 4.35 (34 reviews)
Rating: 5
Summary: The one book every serious investor should read
Comment: At first glance, Security Analysis - one shy of 700 single spaced pages without a single picture other than a smiling Mr. Graham on the cover - appears not for the faint of heart. Inside, however, lies the single greatest book on investing ever written, which remains remarkably readable, insightful and timely nearly seven decades after its first edition. Graham, a successful investor in his own right, was also a highly effective and influential teacher (one of his students named Warren Buffett has done quite well), and his methods and language are refreshingly clear and (believe it or not) concise. The length of the book is due to the breadth of its content, not to any wordiness or unnecessary diversions.
Graham (and his collaborator Dodd) meticulously and methodically builds a framework for the analysis and decision-making necessary for truly good investment decisions. Step-by-step, they lay out a general approach and philosophy for investment (as quite distinct from mere speculation) followed by the systematic analysis of fixed income, convertible and equity securities (i.e., bonds, converts/preferreds, stocks); a detailed discussion of financial statements; and a description of certain underlying differences between the intrinsic value of a business and its fluctuating stock price. As a result, the reader emerges with a solid philosophy and approach for his or her own investments and the analytical tools to make actual buying and selling decisions.
This book is neither a get-rich-quick scheme nor an empty academic exercise. Graham does not set out to justify or theorize about the market. Instead, he sets out to counsel the student on the profitable investment in individual securities. Security Analysis contains dozens of case studies and lessons that are just as relevant today as in the post-1929 aftermath, including particularly misleading technical analyses, dangerous justifications for the valuations placed on hot new companies and the dilutive effects of stock options. As other reviewers have noted, Graham has been a towering figure in Finance, influencing Warren Buffett and countless other successful investors, and yet the lessons contained in this book are repeatedly ignored by far greater numbers of individuals and professional investors. The methodologies and rationale for justifying dot-com and telecom valuations in recent years, for example, are strikingly similar to the new stock issues Wall Street marketed (and people bought) just as eagerly in the late 1920's.
The book does show its age in some respects. While the principles underlying Security Analysis are completely sound today, there have been important changes in the market as well, such as the pervasive use of stock options as compensation, the unprecedented access to information (useful or otherwise) enabled by the Web, the heightened awareness around corporate governance issues (and the resulting influence of large institutional shareholders, such as pension funds) and the spectacular growth in mergers and acquisitions, which has at the very least added layers of accounting complexity. In addition, Graham relies perhaps too heavily on seeking out unpopular bargain issues based on asset value. In today's environment, and partly as a result of accounting limitations, companies are driven as much by knowledge intensity as by asset intensity. A strict Graham approach may preclude considering promising companies whose value lies primarily in intangibles not captured on the balance sheet, such as in the form of brands (Coca Cola), distribution process (Dell) or market position (Microsoft).
As a result, I recommend the following books as enhancements to the core principles articulated in Security Analysis:
* The Intelligent Investor - Written by Graham in the early 1970's with some assistance from his former student Buffett, he adds several decades of wisdom and experience, including greater discussion of technology companies, mutual funds and market cycles.
* The Essays of Warren Buffett: Lessons for Corporate America - A kind of Greatest Hits of Buffett's essays, primarily drawn from his annual Berkshire Hathaway letters to shareholders, this is an extremely useful, funny and brilliant collection spanning a wide range of corporate finance, investment and general business thought. His commentary on some of Graham's key concepts, such as Mr. Market and Margin of Safety, combined with his own current, real-life case studies and innovations make this a must-read.
* Common Stocks and Uncommon Profits - Philip Fisher was, according to Buffett, his second greatest influence after Graham, and this book fills in much of the qualitative analysis of businesses that the analytical Graham places relatively less emphasis on. Fisher is particularly keen on analyzing companies which rely heavily on R&D and new products to generate continuous growth.
Happy investing!
Rating: 5
Summary: Everything after 1934 looks suspicious
Comment: Someone wrote reviews to this book indicating that the major downside to it is its age. The book was written in 1934 therefore it misses all the modern developments of finance - modern portfolio theory for example - and all the new techniques that Wall Street "experts" use today.
As an answer I give an anecdote from Warren Buffett's life:
When stock investments started to become popular, the volume increased ten fold, and the modern techniques to make a profit were developed, Warren Buffet was extremely worried. He remembered what happened in 1929. He loathed the new trends in investment that tried to predict the future price of a stock. Therefore he had a meeting with all his fellow Graham students, he expressly forbid to bring anything newer than the 1934 edition of Security Analysis.
This happened decades ago, but history repeats. We all know what happened 3 years ago. We all know how "experts" thought that the market was booming, and how they let it crash. We all know how they made a profit on the money that private investors lost.
Nowadays when I go shopping for a book I always look at the date of pubblication, if it is between 1997 and 2000 I'm very wary. All those books about "new economy", "digital era", "e-commerce", "dot coms", etc. have to be taken with the maximum attention. Usually they contain a lot of inflated ideas that as we look at what happened after they were written we understand how much those "experts" really understand about stock investments.
If they were wrong then, why should they be righ now?
Trust me, but more importantly, trust Graham, trust Buffett, (those that have been consistently right for 50 years) this is the book to buy, "anything newer looks suspicious."
Rating: 1
Summary: ripping off graham and dodd
Comment: In a moment of confusion, I bought the so-called "fifth edition" of Security Analysis ... what a scam! This almost unreadable text may be more "up to date" than the 1934 or 1940 editions, but it completely lacks the beautifully elegant prose of the original.
The "fifth edition" is just another fat and overpriced textbook, taking advantage of the Graham and Dodd brand to sell a quite unrelated product. By all means, buy the classic written by the original authors (1934, 1940 editions), but stay away from this "fifth edition." It's really the "first edition" of something quite different and not very impressive.
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Title: The Intelligent Investor: The Classic Bestseller on Value Investing by Benjamin Graham ISBN: 0060155477 Publisher: HarperBusiness Pub. Date: 22 January, 1986 List Price(USD): $30.00 |
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Title: The Interpretation of Financial Statements by Benjamin Graham, Spencer Meredith ISBN: 0887309135 Publisher: HarperBusiness Pub. Date: 15 January, 1998 List Price(USD): $30.00 |
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Title: The Intelligent Investor: The Definitive Book On Value Investing, Revised Edition by Benjamin Graham, Jason Zweig ISBN: 0060555661 Publisher: HarperBusiness Pub. Date: 08 July, 2003 List Price(USD): $19.95 |
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Title: Common Stocks and Uncommon Profits and Other Writings by Philip A. Fisher, Kenneth L. Fisher ISBN: 0471445509 Publisher: John Wiley & Sons Pub. Date: 22 August, 2003 List Price(USD): $19.95 |
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Title: The Essays of Warren Buffett : Lessons for Corporate America by Warren Buffett, Warren E. Buffett, Lawrence A. Cunningham ISBN: 0966446119 Publisher: Lawrence A. Cunningham (The Cunningham Group) Pub. Date: 11 April, 2001 List Price(USD): $25.00 |
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