Security Analysis is to investing what On War is to military theory: a manual of fine tuning of definitions that is of no practical import, and is for some reason revered by professionals in the field, despite the fact that they likely do not remember or use any part of it. To utter the words "I have read and learned from Security Analysis" is fashionable. Likewise to utter the words "I have read and learned from On War". But what information can be used from either book, in finance or in war, respectively? No information.

I first started the book from begining but then I lost patience and went back to my management days book on portfolio analysis. After few days I again picked up the book but from the middle and it was really intersting to get a perspective on EPS, dividend and various thoughts on why and what dividend.
So then I analysed a few shares in my portfolio and could relate the things.

Few things I got clarity about :
EPS Earning per share
PE how much I am ready to pay to 1 Rs earning of a company.
Dividend yield: ratio of dividend paid to market price
Earning per share: earning per share is PAT divided by no of shares outstanding
Nice principle which we actually can see around “withholding of dividend for the sake of future profits has not been hailed with such an enthusiasm as to advance the price of the stock”.
Earning power of corporation does not generally expand proportionately with increase in accumulated surplus.
In the end of dividend chapter, author very pertinently raises the paradox that if profit is paid in terms of dividend and no major surplus is carried forwards and also if surplus is carried forward and without any proper investment in both cases the market value may suffer.
From dividend we move on to analysis of income statements where author gives three principles :
1 what are the true earnings of the period
2 what indications it gives to the future earning power
3 how has the earning statement arrived at reasonable valuation

Then from stock analysis purpose author discussed three aspects :
1. non current profit and losses
2. Operations of subsidiaries
3. Reserves

Very valid question being asked is to what extent should write down of inventories and receivables be regarded as extraordinary deductions not fairly chargeable against the years operating results. The charge to surplus goes unnoticed the credit to income may have determining influence upon market price of security

Book value : also referred to as asset value. Add all tangible assets subtract liability and stock issue and then divide by no of shares.

Current asset value : it is index of liquidating value, ie the money owners could get if they want to give it up.

We can check estimated liquidating value per share, book value per share, current asset value per share, cash asset value per share and the market price per share to ascertain what multiples is the share trading wrt the above values.

A stock selling below its liquidation value is either cheap or some corrective actions are required.

Avoid issues which have been loosing their current assets at a rapid rate and show no definite sign of ceasing to do so.

Bargain :- if the stock is selling below liquid asset value, no danger of dissipating the assets and formerly shown a large earning power on market price.
But above is true if stock are purchased when total valuation of market is low.
Balance sheet reading would show financial weakness that may detract from investment. See balance sheet to see if the cash is adequate and current assets bear a suitable ratio to current liabilities and if there is any indebtness of near future maturity.
Working capital ratio: current assets over current liabilities.
Acid test : current assets exclusive of inventory must be equal to current liabilities.
Financial difficulties are almost always heralded by presence of bank loan, rarely created solely by ordinary trade account payable.

5 stars probably wouldn't be enough to rate this magnum opus from Benjamin Graham. Although this book is more than 700 pages, still, every pages provide techniques and guidance with great importance any investor needed.

"Start analyzing a stock with a null hypothesis and rejecting it" is what this book is all about. Graham uses numerous examples and methods to guide the audience and investors to achieve this goal. So what is the "null hypothesis"? H0: Stock price, indicators and financial statements don't represent the whole picture of profitability. Every chapter, Graham teaches us how to uncover the hidden traps of financial statements, how businesses use different means to hide their true business performance. For instance, how companies use depreciation, reserves account and different accounting methods to disguise their losses or overstate their earnings. How balance sheets can show us the financial stability, the justification of their reported earning and the efficiency of the operation. An investor, like a scientist, required to check, compare and judge whether such stock is as good as the market claims to be by scrutinizing, rearranging and calculating the "intrinsic value" of the stock. "Systematic and hard work", Graham claimed, is the key in rejecting this null hypothesis.

Yet, this book has been written for more than 80 years, some of the topics discussed may not be relevant or accurately reflect the modern stock market. The sixth edition, by providing an introduction prior each part from successful value investors in the information era, provided a great reconciliation between two time periods.

In short, Great book and deserve to re-read it again and again!

In the forward to this edition of Security Analysis, Warren Buffett tells us that he has four books in his library that he treasures most. Two of those books are first editions: The Wealth of Nations and The Intelligent Investor. The other two books are both Security Analysis. One of those books was owned by Dodd and has notes throughout it to be included in the second edition of the book.

This particular edition is great in that it has the text of the second edition, but it also has the first edition on the accompanying CD. There are extensive notes on the CD.

Security Analysis is long, but it is not a dry, boring book. It is very informative and easy to read. The only problem I see with it is the inconsistency of the layout of tables. Some tables go from early years to later years and others run in reverse order. This means in order to digest the material, you first must take a look at the years column to see if things are improving or getting worse as the years go by.

This particular edition has a copyright of 2009, but it says practically nothing about the 2007-2008 situation. It would be great if the next edition also covered those years and if the editors would include a few color charts and graphs. It would also be great if all the articles referenced in the footnotes were included on the accompanying CD.

The authors speak of the Efficient Market Theory and that, if it is correct, all information is already included in the price of the security. This could only be true if humans were not a part of the equation. As long as we have humans, we will have people who believe in one idea and most others will follow in their footsteps.

Since the Market is a voting machine, there will always be the opportunity to find a security that is not trading at its true value. Most investors trade with the crowd. As long as that is the case, those who actually analyze securities will be able to find value stocks.

Our library obtained this book from another library. I was the first ever to check this particular copy out. It has been sitting on their shelf nine years and never been opened. It is a pity that such valuable wisdom is sitting on a shelf and has never been read. You should be the one in your group to buck the trend and obtain this valuable information.

Most in the financial world have not read this book. You will have a secret source of insight into Mr. Market once you read this.

We have to give this edition all five stars. Although it was written in 1940, it is just as useful today as it was many years ago.

We checked a copy of this book out from the Wharton County Texas Library through their Interlibrary loan service. We are under no obligation to write any review, positive or negative.


We are disclosing this in accordance with the Federal Trade Commission's 16 CFR, Part 255.

The bible of securities investing i.e. studying financial statements and investing in stocks. Written in the 1930s. Still unsurpassed.

It's the bible of investing. I liked more the Intelligent Investor and I read this more to understand more how to read financial statements of banks and Insurances. I haven't found this information but I have to say that still this book gives a more in depth explanation of matters of security analysis and how different securities are interrelated to each other.

This is the book Warren Buffet used to learn how to make money in stocks. It is not an easy book to read but the information contained within is golden, and cant be found elsewhere.

Warren Buffet's introduction explains why this book is a must read for anyone interested in investing.

Some sound fundamental thinking, but unfortunately as it's currently talking about bonds in 1934, it's proving all too effective in the just-before-bedtime reading slot.

A book that really touches the issue in detail, but it is still carrying old facts of 1920s-1940s. Hence its broad mention upon railroad issues, public utility is too stretched that I suspect would benefit little to the analysis of popular industries nowadays.

In my opinion the recent edition of "Intelligent Investor" does better in updating and put some footnotes to adjust the statements with the now condition. In this book, even one of the co-author added to this edition humbly admitted that he had not completed reading this book until he were invited to write the chapter. And I think this book is too long for outdated information.

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Graham is an interesting author with original ideas and not afraid of challenging other's opinion and bluntly mention them in his book. The main purpose of Value Investing is to find securities in discount (lower market value than its book value/ working capital) to establish margin of safety in case of default. The goal is to maintain investment position, so any profit taking because of increase in principal is best avoided and strive to have continuous annual income instead; and only to sell the security when the earning power is likely to diminish or when the price is deemed too high above premium (it becomes speculative).

I feel hesitated to read big part about bonds to this book; but the concept of Value Investing itself lies on a thorough fundamental analysis of the company. A clause in bonds' indenture, capitalization structure, or warrants attached to bond might affect stock so might as well getting to know them as well.

Topics about Cash Flows and analyzing companies working with mostly intangible assets like software comp/ tech comp would be great complimentary reading to this classic (a.k.a outdated) book. The fact that the depression happened in Graham's time is now considered as only mild recession could probably change the analyses to stricker threshold.
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The concept of Value Investing is great, but the founder himself might experience some inconsistency in doing it. Future forecasting and timing on buying are not an action of investment - Graham argued in both Intelligent Investor and Security Analysis. But I wonder if he just did it:
"In the spring of 1951, the Dow Jones Industrial Average stood at about 250.Professor Graham suggested his class at Columbia University Business School that maybe the student would benefit from delaying his investing career until after the Dow had completed ITS PREDICTABLE DECLINE to under 200, which had yet to happen in 1951. Warren Buffett declined the advice, and a good thing it was because the Dow did not return to 200 that year or in any year since. “I had about ten thousand bucks” when Professor Graham gave his advice, Buffett told the Wall Street Journal. “If I had taken his advice, I would probably still have about ten thousand bucks.” pg. 287, Introduction to Part III.

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I push myself to finish this book just before my birthday. 908 pages gifted to myself! Joy!
Next!

The first book to read to understand stock market and stock trends. The chart analysis is time-tested and is good for commodities and other futures.

Extremely hard to read, but well worth it.