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on April 14, 2001
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!
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on September 5, 2001
This is book has been updated many times (through the fifth edition). If you have read the latest edition, and believe you have read anything like the original, go back and read this one. Once you have read 'Old Ben', you will find other editions very disappointing. That could be why Warren Buffet suggested going back to the original if you want to know what value investing is all about.
Current investment practice, and later editions of this book concentrate on the one thing that Graham said was, if not impossible, very non-productive - estimating future earnings. This book concentrates on understanding proven value. Where one spends most of its time on the income statement, this book spends most of its time on the balance sheet. There is a world of difference, and the difference leads to a much different portfolio, and future.
There is, as the author points out repeatedly, a difference between investment and speculation. There is also a difference between helpful discussion and meaningful analysis. The original edition is full of meaning, written by a practitioner who also could teach. Later editions (especially the fifth) make me wonder how much of the master's works the new authors read before starting. It also makes me question how much influence Donaldson, Lufkin, & Jenrette and Autanet exercised in return for their grant to finance the book.
If you want a great book on investing read the original. It will give you much more insight and at least twice as much 'food for thought'.
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on October 26, 2001
I think that word, speculation, appears in the book about 1000 times. Graham's investment theory is that if you haven't analytically measured an investment's worth - you are speculating, or, buying into speculative securities. This book is very old and the manner in which the words and phrases were written are a resemblance of this.
There are two major parts to this book: 1) Fixed Income Securities and 2) Stocks. Both are given a considerable amount of analytical consideration and explanation. These writings are detailed as well as very dry and boring. If your looking for an exiting, new-age, kind of book - this is not the one for you. Careful observation and undertanding of the writings is a must in order to successfully learn from Graham's teachings.
I have read both Ben Graham's Security Analysis and Philip Fisher's Common Stocks Uncommon Profits: I am like Warren Buffet in the sense that I am 85% Graham and 15% Fisher. Fisher is mainly a Growth Stock investor while Graham is a Value investor. My portfolio alone is proof that value investing in high-growth stocks averages a far better return than simply buying high-growth stocks at whatever the market price may be at the time - relative to earnings. Like Real Estate investing, you want to buy low and sell high, not buy high and hope it goes higher so you can sell high!
Despite the book's dry and boring format I love the book as it's a great guide in analizing any propestive stock - if you agree with the Value Investing Theory!
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on March 17, 2001
67 years after this initial version of Security Analysis was published, it is still considered a bedrock for value investors. Written in the heart of the 1930s Depression, Benjamin Graham laid down his theories for all areas of investing in this book. With this book he revolutionized the ways in which investors evaluate the potential yield and growth of stocks and other securities.

In this book, Graham gives his theories, backed by many early 20th century examples, most of which are still applicable to today's market. Graham discusses bonds, preferred stocks, some of the original mortgage-backed securities, and other fixed income investments. Then in the latter half of the book, he gives his instructions for investing in common stocks.

This book will be very monotonous to anyone except for serious investors with a solid financial knowledge base. But for those exceptions, it will be very interesting. I think Graham's instructions on reading balance sheets !and income statements to be the most productive thing I gained from this book. For investors who enjoy financial theory and want to learn more about securities research, this book is a must.
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on December 14, 1999
Although it is fun to read Graham & Dodd's First from the context of historical perspective, there is more to this volume than history. When I first learned that Warren Buffett keeps and peruses EACH edition of Graham & Dodd's "Security Analysis", this struck me as a sort of silly fanaticism. But anyone who takes the time to read more than one edition of "Security Analysis" will understand why Buffett probably keeps all four. For better or worse, each edition has some gem which may not be found in the other volumes. In the first, for instance, there is a section on rights offering analysis which can't be found in the 3rd and 4th editions (I've actually never been able to get my hands on a second edition, so I don't know whether the equation he offers in in the 2nd or not).
I'm not sure if this would be the first "Security Analysis" volume I'd try to tackle (the 3rd is probably the best...Graham participated less actively in the 4th), but if you are comfortable enough with security analysis terminology to know what is antiquated and what is not in this 1934 text, you will not be sorry you made the effort to buy and read it.
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on December 3, 1996
In this book you will receive an education in interpreting the balance sheet and other financial documents related to the past, current, and potential future profitability of a compay. The often complicated "investigations" the authors expect you to undertake have a seemingly simple mission in mind: Find the undervalued stocks. That is, the stocks that are worth more than you would have to pay for them. Such a simple destination, but such a difficult and winding road to travel. "Security Analysis" is the roadmap for your trip.

Some of the road markers you will see along the way include a host of financial relationships, such as Price/Earnings ratios, Price/Book value ratios, Growth rates, etc. You may not know what these are now, but you will by the time you are finished. These mathmatical relationships are the arrows that lead you to your destination.

You will also learn the value of dividends, something often overlooked in our current investment climate. Dividends, you will see, are the shock absorbers that help smooth the potholes in the road you will be traveling on. You may later find that there is a very sucessful group of value investors out there completely devoted to dividend yield, inspired by this book.

Mssrs. Graham and Dodd also didn't forget about diversification. The book is not limited only to common stocks, but a wide variety of investments. This includes bonds, preferred stocks, and many other creations of Wall Street.

If there is a knock on this book, it is that it isn't very user friendly. It is a complicated text, originally written as a textbook for analysts presumably already well versed in the terms used by the authors. Given the value of the book to the reader's worth, such a hill to climb should be greeted with pleasure. Once at the top, the ride back down on the other side will be a thrill.
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on August 4, 2002
I just finished reading Grahm and Dodds Security Analysis, and
was completely overwhelemed. If you can read this book, understand everything in it, and be able to apply it, you are golden. However, if you do not really have much background in finance and accounting, it will be VERY hard to read certain parts. As a college sophomore, who has not yet taken any finance or accounting classes, i was only able to understand and benefit from perhaps 50% of the books content. This is a book where after further education in finance and accounting, it will be absolutley essential to successful investing. Also, because of the year the first edition was written, certain terminology, and examples (ie railroads) will not seem useful, however the principles those examples demonstrate are still very much applicable.
I would recommend reading the book to anyone who is interested in investing, however do not think it is something you can finish in a weekend or even a week. It took me a month.
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on June 9, 2004
A book that has been continuously in print for nearly 70 years obviously has timeless relevance. The principles of value investing, spelled out for the first time in Security Analysis by Benjamin Graham and David L. Dodd, have made fortunes for investors since it was first published in 1934. For example, Warren Buffett calls this book his Bible. Much has changed on Wall Street since the 1930s, but the concept of buying undervalued companies has not. In addition to its lucid explanation of investment basics, the book is a fascinating picture of a time when the lessons of the Great Depression were still being absorbed. The Securities Act of 1933 had just changed the rules of financial disclosure, and most public companies were manufacturers, mines, railroads or utilities - not the makeup of today's blue-chip portfolio. We recommend this book to serious investors who want to cut through modern Wall Street jargon, and to students of financial history.
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on March 10, 2013
It has been a while since I read this book... it is not for the novice or beginner and is very indepth... It is recommended by the likes of none other than Warren Buffet... that tells you something! (or it ought to!) It does take a fair amount of concentration to get into and is not a light read... it may be an old book, but it is a classic for investors... Very helpful and a must read if you are a "value" investor and want to really get into finding out what to look for in finding those value gems... However it is a long read and almost more a teaching book than a fun book to read... if you do get this book and give it a good read, you will be a better investor and much more prepared to take on the role of being a well-informed "self-investor"! Good luck with your investing journey! FS
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on July 23, 1999
This book is very informative in learning how to be as good as an investor as you want to become. With this book Warren Buffet bases 85% of his principle for investing, and I can sure see how someone can invest honestly and really profit over the years. The great thing is that allot of the companies that security analysis talks about have been around for years, and if someone was to perform a security analysis on some of the companies today, I'm sure they will come to some pretty good long range decisions. Coca-cola is one of the Companies that security analysis does talk about, and today that's one of Warren Buffets major purchases, it goes to show the value of the book. Also, with security analysis I feel you could attain just about any financial dream.
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