Customer Reviews

Security Analysis

5 star:		(32)
4 star:		(12)
3 star:		(4)
2 star:		(2)
1 star:		(2)

 

 

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.

My star rating is for the 1934 edition, but this review may appear for other editions of the book.

The 1934 edition came out before the creation of the SEC and deals with a lot of accounting irregularities that are not such a problem today. I suggest you buy a newer edition.

Some people seem to have a preference for the 1940 edition. The 1951 edition was the first one written after the Great Depression, so it dealt with businesses in a more normal economic environment. The 1962 edition was the last written directly by Graham and Dodd, but it is currently unavailable. The 1988 edition is the most recent edition of Security Analysis, but it was updated by other authors years after Graham had died. The 1988 edition is the one currently used as a textbook for Columbia University's Security Analysis course.

Update: Since I wrote my review, the sixth edition of this book has been published. Apparently, it is essentially the 1940 edition with commentary from some of today's most notable value investors.

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."

Yes, this is the best investing book I've ever read, but I never read the 2nd or 3rd editions so maybe they are better? I do know that the 5th edition is absolutely horrible, it wasn't written by Graham and has nothing to do with this book, and you won't learn anything about investing from reading it.

You do need a strong background in accounting to understand this book. There are some archaic accounting terms used in the book that no longer apply today. A law school course in Corporations Law is helful here too.

Nevertheless, every more modern book on "value investing" never really explained it as well as this book written in 1934.

Yes, the book is long, but who said investing should be easy? If you want easy money, go to Vegas. I made hundreds of thousands of dollars in the stock market after I read this book. This book is more valuable than a college education and a lot cheaper.

Eventhough this book is over 65 years old it is still as relevant as ever, maybe even more so. With all the hussle and bussle of the day-traders and the momentum style investors, it is a nice change of pace to read a book based on common sense, buiness-style investing. Read his words, understand his philosophies, and you will profit!

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.

Like some investors today, I am a student of Warren Buffett, "the Sage of Omaha". Mr. Buffett claims that Ben Graham taught him much of his strategy to picking the right stocks. Buffett has read this book at least 12 times, according to some sources. Read this book and perhaps you will profit from it, too. And sleep better at night! The book gets 4 stars only because his examples can be rather tedious with math and companies from the 1930's. Graham is a terrific writer and easy to read, though.

Graham is a patient logical thinker who explains his methods meticulously.Don't look here for a get rich quick scheme.If you love the markets, and already have a basic knowledge of stocks and bonds,this book will give you a good base of reference to discern true value and keep from being caught up in the latest fad.Written with the benefit of hindsight after the Crash of 29,it is a must read.It is not light reading,yet sticking with it proves very rewarding.

Go buy the classic 1934 edition. The informal style of the 1934 edition can be easily read and understood by just about anyone. If that one was good enough for Warren Buffet, it's good enough for the rest of us. This latest edition reeks of academic arrogance and is poorly written with points that ramble on forever with no conclusion and examples that make no sense. The 1934 edition has some outdated examples but its concepts and forecasts are so true that you'd swear it was a historical perspective written in recent years.

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.