Most Helpful Customer Reviews
108 of 110 people found the following review helpful:
4.0 out of 5 stars
A true classic, June 14, 2006
This review is from: Security Analysis: The Classic 1951 Edition (Hardcover)
I have read this book twice now - one time is certainly not sufficient to absorb all of its wisdom - ten times probably would not suffice. There are some people who question whether this book is still relevant because it was published over half a century ago. I doubt they ever took the time to read it, or if they read it, I doubt that they really thought about it. The book's central point is that an investment should be made based upon a thorough investigation of the investment's merits - not on the market generally, or interest rates, etc. It does not promise an easy path to riches - the techniques take work. However, Graham and Dodd's theory of focusing on safety of principal plus satisfactory return has been time-tested, and no one can question the success that Graham's disciples such as Warren Buffett have enjoyed. A few interesting points: the book is not limited to equity investments. As Security Analysis highlights, equity investments and debt investments are similar insofar as both lay claim to the underlying assets of a company (they are different in the priority they have if the company does not make money). The book also contains an excellent section on analyzing financial statements. Many of the accounting concerns that this book raised in 1951 occured during the Internet bubble (such as the effect of stock options on a company's value and the use of write-offs to manage earnings). So much for the book being dated! Even though the book does spend some time analyzing utilities and railroads, the underlying approach used there does have some relevance to other companies. Although many people simply associate Benjamin Graham with low p/e ratio investing, Security Analysis discusses various means to review and understand an entire company. Thus, although p/e ratio is one factor Security Analysis considers, it is far from the only one. The book also contains a great discussion of how dividends may affect a company's value (largely based, it appears, on the work of John Burr Williams, author of "The Theory of Investment Value"), as well as an insightful overview of stockholder/management issues. If I have any criticisms of this book, it is that it pre-dates the use of cash flow statements and that the writing is at times a bit slow-going. That being said, the book itself is invaluable, and I can definitely trace its effects upon any number of other works, all of which become more relevant when read in conjunction with Security Analysis. Examples include: David Dreman - "Contrarian Investing: the Next Generation" Martin Whitman - "The Aggressive Conservative Investor" Mary Buffett - "Buffettology" Rappaport, Mauboussin - "Expectations Investing: Reading Stock Prices for Better Returns" Although these books may use different approaches than Security Analysis, it is obvious that the methods set forth therein stem, at least in part, from the theories set forth in Security Analysis. Given that this book can be heavy, it might be useful to read Chris Browne's "Little Book of Value Investing" or Graham's "Intelligent Investor" first. In many respects, those books are really less intensive versions of Security Analysis. However, ultimately, Security Analysis is a more useful work because of its in-depth nature.
Help other customers find the most helpful reviews
Was this review helpful to you? Yes
No
10 of 11 people found the following review helpful:
5.0 out of 5 stars
Security analysis? Financial analysis? If you have an interest in either, then consider reading this invaluable long book!, August 12, 2007
This review is from: Security Analysis: The Classic 1951 Edition (Hardcover)
What a great book! It was long, long-winded at times, and full of small print and not too much white on the pages, but full of content on the subject at hand: security analysis. I just finished reading the 3rd edition (2004). The original edition was published over 50 years ago and for the most part it is just as applicable today as it was way back in 1951. The intended audience for this book is obviously people who do security analysis for a living. They might be people working on Wall Street, analyst firms, investment firms, hedge funds, mutual funds, or merger/acquisition departments. But I don't fit into any of those categories. I'm a SCORE volunteer counselor who coaches small business owners and wanta-be entrepreneurs on starting and improving businesses. The principles included in this book are things my clients need to understand and be adept at using. Could the book have been titled Financial Analysis instead? Maybe. I was most interested in reading the following sections: >>Analysis of Financial Statements >>The Valuation of Common Stock >>Stockholders and Management >>Security Analysis in Action I highly recommend this book for anyone who is interested in better understanding how to evaluate companies and what they are really worth so they can be made better and sold for more. It is not light reading, and if you are used to zipping through a book in a few hours like I am, then skip this one. I didn't see any discussion on cash flow as something to consider when evaluating a company for financial soundness. And I think it should have been included. Also, I didn't really like having to read about railroad and public utility companies. Clearly there could have been some more interesting companies to talk about when making points. All in all, there's lots of wisdom presented in this huge tome and it's invaluable. 5 stars!
Help other customers find the most helpful reviews
Was this review helpful to you? Yes
No
13 of 16 people found the following review helpful:
5.0 out of 5 stars
A brief comment, March 17, 2008
This review is from: Security Analysis: The Classic 1951 Edition (Hardcover)
This book is rightly considered the true bible of stock analysis, and is famous also for being how Warren Buffet approaches investing, as Graham was Buffet's own teacher. The book has extensive chapters dealing with every topic useful to the subject of stocks, from reading financial statements (one of the things that almost all amateurs could probably be better at, including myself), to assessing the company's true value, breakup value, etc. As one writer here already said, this is no easy path to riches, since this is a true discipline that takes a lot of work, but it can be done. However, late in his life, Graham was interviewed and said that his views had changed, and made a very important statement at the time. He said that for many decades, exhaustive methods of stock analysis had been profitable, but that was no longer the case. One must remember that the goal of his method is often not so much for determining the true value of a stock to be bought as an investment, so much as whether it should be liquidated, and the parts sold off, which are worth more individually than the company itself. In other words, the parts are worth more than the whole, and his method was a profitable way to assess likely candidates for this process. If I remember right, Graham himself was involved at least once in regard to a certain company as an activist investor who successfully pressured management to accept a buy-out or liquidate the company. In fact, at the time of the interview, Graham said that "He was no longer a proponent of detailed methods of stock analysis." He said that there had been a time when that was quite profitable, but that times had changed, and he now favored a cash-flow oriented approach. This method has many adherents now, and Standard and Poors, for example, is known today for using a proprietary cash-flow analysis. Basically, the true value of a company, and therefore its stock, is essentially the present discounted value of all future cash flows. That having been said, I still learned a lot from this book, and it has probably never been equalled as a rigorous text on the skills to do true stock evaluation and value-style investing.
Help other customers find the most helpful reviews
Was this review helpful to you? Yes
No
|
