Classic

Benjamin Graham>>>>guru besar investasi

6/5 again. This book and The Intelligent Investor go hand in hand; however, I suggest reading this one after it. Security Analysis can come off as too technical (and therefore, outdated) without the proper motivation to study value investing, and The Intelligent Investor provides it well.

The Intelligent Investor prequel, but more in depth.

Without a doubt Graham and Dodd were wise men and they would still be wise men. That makes this book interesting regardless of age, but it has lost some of its significance. Not because they are wrong but because the things they are pointing out is of much less relevance in a world where fixed income securities are not mainstay investments, and where fixed assets are less important to a company's wellbeing than it used to be.

So what is left? A lot of really wise advice of the general kind (see quotes below). Unfortunately it's embedded in a very thick book and I wouldn't recommend anyone reading the whole book to pick out those advice unless they are really interested in investments, and in particular value investments and if they are, I hope they are already familiar with much of what Graham and Dodd write here. If from no other source, from The Intelligent Investor by the same authors. That book is much more general and easy to digest.

Some quotes from the book

The most general advice of all:

n  "The future is often no respecter of statistical data."n

About trust in the management (Norwegian Vardia is an ongoing example of this):

n  "When an enterprise pursues questionable accounting policies, all its securities must be shunned by the investor, no matter how safe or attractive some of them may appear."n

About making those really great deals:

n  "Obviously it requires strength of character in order to think and to act in opposite fashion from the crowd and also patience to wait for opportunities that may be spaced years apart."n

About people trying to convince by complicating things. I will paraphrase Warren Buffett - don't invest in something you don't understand:

n  "Because figures are used in this process, people mistakenly believe that it is “mathematically sound.”"n

About trusting advisors absolutely:

n  "... if the adviser knew whereof he spoke he would not need to bother with a consultant’s duties."n

About being using cash as an indicator of success rather than the numbers reported:

n  "We and other investors today tend to focus on cash flow after capital expenditures (free cash flow), instead of earnings, to evaluate the investment merits of a business. One advantage of this approach is that it helps shortcut a good many games that management can play in reporting profits."n

About skepticism towards earning reports:

n  "The basing of common-stock values on reported per-share earnings has made it much easier for managements to exercise an arbitrary and unwholesome control over the price level of their shares. Whereas it should be emphasized that the overwhelming majority of managements are honest, it must be emphasized also that loose or “purposive” accounting is a highly contagious disease."n

One that is very relevant to people tricked into buying stock in the dot com bubble:

n  "Buying stock in new or virtually new ventures. This we can condemn unhesitatingly and with emphasis. The odds are so strongly against the man who buys into these new flotations that he might as well throw three-quarters of the money out of the window and keep the rest in the bank."n

373-Security Analysis-Benjamin Graham-Economics-1934

Barack
2021/11/07

" Security Analysis ", first edition in 1934. The focus of this book is still its eternal guidance and recommendations-careful analysis of the balance sheet is the main way of investment success, all other considerations are nothing but interference. The author witnessed and survived the political and financial turmoil of the Great Depression and World War II, and is now able to better outline wise and profitable investment plans for the second half of the 20th century.

Benjamin Graham was born in London, England, UK in 1894 and died in 1976. Studied at Columbia University. Representative: " Security Analysis ", " The Intelligent Investor ", etc. He is known as the "Father of Value Investing". His investment philosophy emphasizes investor psychology, minimum debt, buy and hold investment, fundamental analysis, concentrated diversification, buying within the margin of safety, aggressive investment, and contrarian thinking, etc.

Table of Contents
PART I SURVEY AND APPROACH
PART II FIXED-VALUE INVESTMENTS
PART III SENIOR SECURITIES WITH SPECULATIVE FEATURES
PART IV THEORY OF COMMON-STOCK INVESTMENT. THE DIVIDEND FACTOR
PART V ANALYSIS OF THE INCOME ACCOUNT. THE EARNINGS FACTOR IN COMMON-STOCK VALUATION
PART VI BALANCE-SHEET ANALYSIS. IMPLICATIONS OF ASSET VALUES
PART VII ADDITIONAL ASPECTS OF SECURITY ANALYSIS. DISCREPANCIES BETWEEN PRICE AND VALUE
PART VIII GLOBAL VALUE INVESTING

" If the modern reader were asked, what did the junk bonds of the 1980s, the dot-com stocks of the late 1990s, and, more recently, the various subprime mortgage portfolios of the 2000s all have in common, the first correct answer is that each of them took a nosedive from a highly inflated price to one rather closer to zero. You can throw in, for good measure, the net asset value and reputation of the world's most intelligent hedge fund, Long-Term Capital Management (LTCM). "

Reality is sometimes more magical than fiction. People who are in a frenzy can hardly imagine the bursting of the bubble. Later generations, as bystanders, will probably marvel at the once group fanaticism.

“ Graham and Dodd have been ignored by those who suffer from the misconception that trying to make serious money requires that one take serious risks. ”

Everything has two sides. If you want to succeed, you may fail. If you want to make money, you may lose money. If you want to become a hunter, you may become prey. If you only see the benefits of victory and ignore the risks of failure, you may encounter a failure that cannot be turned over. Maybe the timid and cautious will have the last laugh.

“ Avoiding serious loss is a precondition for sustaining a high compound rate of growth. ”

We can fail many times, but the premise is that every failure is something we can afford. If we say that the loss of a failure caused us to lose our vitality and lose our strength, then such a failure is not tolerable, so we must be able to accept failure and be prepared for failure. But at the same time, we must also try our best to avoid losses beyond our ability to bear.

“ Whatever the literal truth, Graham was the rare academic who was both theoretician and working practitioner. ”

It is very difficult to be able to do well in both theory and practice. Sometimes it is easier to go to extremes. It is simply an art to be able to do well in both aspects and get a balance.

" The changes in the marketplace have been so profound that it might seem astonishing that an investment manual written in the 1930s would have any relevance today. But human nature doesn't change. People still oscillate between manic highs and depressive lows, and in their hunger for instant profits, their distaste for the hard labor of serious study, and for independent thought, modern investors look very much like their grandfathers and even their great-grandfathers. ”

The environment is changing and many technologies are changing with each passing day, but human nature is actually not much different. This is why we can still learn from history and the stories of predecessors.

“ Graham and Dodd's rejoinder was timeless: at a price, any security can be a suitable investment, but, to repeat, none is safe merely by virtue of its form. Nor does the fact that a stock is “blue chip” (that is, generally respected and widely owned) protect investors from loss. ”

We all know that everything should have a reasonable price, but the question is how to find this point. The true value is, the benevolent sees the benevolent and the wise sees the wisdom.

“ The Long-Term Capital Management hedge fund made just such a bet, or a series of bets, in 1998. Each of its trades had been mathematically calculated (the fund had a pair of Nobel Prize winners in residence), and its previous experience suggested that on each of its trades the odds were in its favor. However, LTCM, which was highly leveraged, risked far more than it could afford to lose. ”

The current institutionalized financial investment has shifted from qualitative to quantitative. It is more like an engineering job. People rely on algorithms to draw conclusions and minimize emotional interference.

“ While intrinsic value measures the economic potential—what an owner might hope to get out of an asset—book value is an arithmetic computation of what has been invested into it. ”

According to the idea of ​​value investment, finding the true value of an asset is the most important. But how to define its true value? There are too many dimensions, and it is necessary to find the point with the largest impact factor.

“ Nonetheless, they do exist. Individual stocks are often cheap when a whole industry or group of securities has been sold down indiscriminately. ”

The core of buying and selling is to buy at a low price and sell at a high price, but the problem lies in how we measure whether the current assets are at a high or low level. Misjudgment will lead to losses.

The Bible.

When it comes to Value Investing, the wisdom of Benjamin Graham rings true.

Great knowledge from the Master Benjamin Graham himself but a very hard book to get through. I would read War and Peace twice again before attempting to battle through it again. But don't get me wrong he is the founder of value investing and Warren Buffet's Teacher!

I had always intended to read Security Analysis, but due to the size of the book (over 700 pages), I did not get around to reading it until around 2008. It was well worth the read. True, some of the examples are dated, like the emphasis on railroad securities and some old accounting rules, but the underlying principles still apply today.

The book emphasizes concepts, methods, standards, principles and logical reasoning, so it works in the current environment, just as it did when Graham and Dodd wrote it in 1934.

2008 was a year of financial and real estate crises which lead to many people seeing huge declines in their 401(k) plans, causing some to note that the days of "buy and hold" are over now. Graham and Dodd commented on this long ago, noting that "the old idea of 'permanent investments,' exempt from change and free from care, is no doubt permanently gone." They believed in long-term investments, not trading, but still said an investor has to keep an eye on their holdings and can't just buy them and forget about them. This advice still holds true today.

They also offer valuable advice on issues as diverse as market timing, intrinsic value, market behavior, analyzing a business, using quantitative and qualitative methods to analyze securities, how investment differs from speculation, key issues for fixed investments vs common stocks, the margin-of-safety principle, the importance of the balance sheet as well as the income statement in analyzing companies, the importance of comparing price to value, and many other concepts that would benefit investors of today.

I would highly recommend this book to serious investors, especially value investors who would benefit from receiving guidance from the men who literally wrote the book on value investing.

The 6th edition is basically the 1940 2nd edition with a number of chapters, plus the appendix, removed to make room for contemporary commentary. The chapters are available as a separate download, nevertheless their omission is unfortunate as many of them are very informative and access to the separate material inconvenient. Certainly at least for the Kindle version, where size is not a concern, the omission is inexcusable -- and doubly so if you examine what it is that they have been left for.

The commentaries read like little more than extended promotional blurbs and do not really add anything illuminating to the discussion. This is seen most amusingly in the final "commentary" on global investing, a topic understandably absent in the 1940 edition. Instead of correcting this shortcoming, a vague essay is offered which mostly rants about the difficulties - giving dated examples, in some cases from the 1980s - so much for updating Graham to today's markets.

More alarmingly, one of the contributors notes that a certain practice is "an unacceptable risk for those of us who invest our own money alongside our client." The reader cannot fail to compare this statement with one made by Buffett in his commentary to Graham's Intelligent Investor, where he notes that a manager cannot afford to take risks precisely because it's not his money that is at stake, but his client's. It only shows how out of touch the editors are with Graham, in character if not in investment strategy.

People should not try to improve masterpieces just for the sake of making a new issue. And in this case the publisher clearly did not have anything relevant to add. If you can, try to get the 2nd edition reprinting instead.

Excellent book !