This book is so obvious and yet people get blinded by greed. It is not only a one time read but I believe this is something that all the investment managers keep referencing this book when the world gets crazy. This book proves to be the hidden gemstone which would make all of us sane in this insane vicinity.

I read this book (and will be reading The Intelligent Investor) as they are the books that shaped Warren Buffett's career. This tome is thick and written in the 1920-30s, so it is a bit difficult to read; however, a careful reading will help an entrepreneur better understand how people can lie to you with financial statements. It was a seminal read for me and an important reading experience.

As someone who only invests in private companies and owns no public stocks, I was hoping for a bit more data that would be usable. Granted, the book does not promise this, but it was the major reason I picked this up. If you have the same intentions, you can go straight to "Section V: Analysis of the Income Account, the Earnings Factor in Common-Stock Valuation" and "Section VI: Balance Sheet Analysis, Implications of Asset Values."

Not a waste of time, but much more dated than the Intelligent Investors. I thought much of the good work done by the Intelligent Investor was weakened by the sanctioning of speculation.

Also overly prescriptive and narrowly framed based on the valuation levels of the day. It's a little like reading the bible - some parts you can take literally (like say the crucifixion), others you can only take figuratively (like say the story of genesis or noah's ark) and others you must throw out entirely (like say slavery or the Moses-led genocides).

Still worth the read though (but only after the Intelligent Investor)

A totally must read for anyone thst is considering investing in the stock market.
This book covers everything from types of investments, balance sheets, management , subsidiaries, ammortization , and perhaps the most important is the variety of real world examples taken from the stock market (1920-1939) and illustrated as charts, spreadsheets ..and how the author is analyzing each company in that specific setup and draws conclusions.
A totally must read !

I like my bookshelves well organized. Ideally, I’d have a section for each type of book I read. Here lies a dilemma: I could place Ben Graham’s “Security Analysis” under both “psychology” and “economics”.

The book has many insights into the human component of the market. In the end, we have to ask ourselves why value investing works. Paraphrasing the words of Dr Wesley Gray, if you know how the market forms expectations and you know how it’s gonna form those expectations in the future and you can bet ahead of that you will make money by construction because market prices reflect current expectations and they also reflect changes in expectations. Graham does a great job explaining how these expectations are formed by giving lots of golden nuggets, like the fact that the market level of common stock is governed more by the current earnings (rather than the long-term average) and by the indicated trend of earnings.

Those expectations are not necessarily formed after looking at a comprehensive amount of data. Quoting:

“It is customary to refer with great respect to the ‘bloodless verdict of the market place’ as though it represented invariably the composite judgement of countless informed and calculating minds. Very frequently, however, these verdicts are based on mob psychology, faulty reasoning, superficial examination and inadequate information.”

If anything, this book will dismantle the whole idea that the markets are efficient.

Commentaries on the parts were very informative and managed to succinctly set the context for each section of the book. I found it a bit dry in some places because of the numerous outdated examples. I admire anybody who was able to read this cover to cover. Personally, I was more interest in equity investments, so I had to read the book in a slightly different order, starting with the last chapters and then skimming through the ones at the beginning which are about fixed-income instruments.

But is it still relevant?
I lack extensive experience in investing, but to me, it all seemed very much still applicable today, with some caveats. At the risk of using an argumentum ad verecundiam, I must say that it probably counts to something that this is Warren Buffett’s favourite book. Inside the value investing circles, “Security Analysis” and “The Intelligent Investor” form the holy duology of investing, and it’s not hard to find out why: Graham’s genius appears to be timeless.

After almost a century from its publication, this book is still by far is the best technical book on stock picking and value investing.

A very in-depth book on the topic. Quite dry reading but that is to be expected. Most importantly, the information is gold so 4.5 stars.

ok

"Security Analysis", written by Benjamin Graham, David Dodd, and updated with insights from Seth A. Klarman, delivers a timeless framework for intelligent investing. It’s not about chasing trends or betting on hot stocks, but about grounding decisions in rigorous analysis and protecting wealth while seeking steady returns. The authors emphasize that successful investing relies on understanding the true value of businesses, not simply reacting to market moods or superficial data.

The essence of this work lies in the methodical approach to evaluating investments. Graham and Dodd lay the foundation for understanding the difference between price and value, teaching investors to discern the gap between market sentiment and business fundamentals. This principle, they explain, is key to identifying opportunities that others might miss. By analyzing financial statements in-depth, investors can evaluate factors such as working capital, debt levels, and true earning power over time, ensuring that decisions are based on sustainable strengths rather than fleeting trends.

The book begins by introducing the concept of disciplined investing, contrasting the fates of two investors during the early 1930s. While one followed market rumors and momentum, the other relied on careful analysis of fundamentals, avoiding catastrophic losses during the market crash. This anecdote illustrates how investing success stems not from luck or speculation but from thorough research and an understanding of intrinsic value. Investors are encouraged to examine both quantitative data—like financial statements—and qualitative aspects, such as management quality and industry conditions. This dual approach equips investors to weather downturns and seize opportunities during times of market panic.

A cornerstone of the book is the evaluation of fixed-income securities, particularly bonds. These investments are seen as a perfect entry point for learning sound investment principles due to their predictable cash flows and straightforward risk-reward dynamics. The authors highlight the importance of assessing whether a company can reliably meet its bond obligations, especially during economic downturns. Metrics like coverage ratios and working capital provide crucial insights into a company’s financial health and its ability to withstand tough times. For instance, companies like U.S. Steel and AT&T demonstrated resilience during the Great Depression by maintaining robust financial buffers, underscoring the importance of business strength over legal safeguards.

The authors also delve into the distinction between market price and intrinsic value, urging investors to focus on the latter. Market moods often lead to price swings that have little to do with a company’s true worth. They cite examples such as Manhattan Shirt Company, whose market price once fell below the value of its cash holdings alone. This irrational pricing presented a clear opportunity for careful investors who understood the company’s fundamental strength. The book repeatedly stresses the value of a margin of safety—buying investments at such a significant discount that even partial errors in judgment or unexpected market events don’t lead to substantial losses. This concept protects investors during market downturns and creates room for long-term growth.

The skill of reading between the lines in financial reports is another vital lesson. Income statements, while seemingly straightforward, can conceal important details about a company’s real earning power. For example, some companies mask recurring losses as “special charges” or manipulate depreciation schedules to inflate profits. Graham and Dodd encourage investors to adopt an owner’s mindset, questioning whether reported earnings align with the actual health and sustainability of the business. This detective work is crucial for separating genuine opportunities from misleadingly rosy reports.

The balance sheet, described as the foundation of a company’s value, offers additional insights into financial strength. It provides a snapshot of what a company owns and owes, revealing critical factors such as liquidity, debt levels, and asset efficiency. During the market crash, companies with strong balance sheets, like White Motor Company and Manhattan Shirt, managed to navigate economic turmoil by maintaining ample cash reserves and prudent financial practices. In contrast, businesses with excessive debt or poor asset management often succumbed to market pressures. By studying the balance sheet, investors can identify companies with the resilience to thrive in both good times and bad.

Ultimately, "Security Analysis" emphasizes that successful investing requires patience, discipline, and a commitment to thorough analysis. While others chase market fads or react to short-term fluctuations, thoughtful investors focus on identifying undervalued assets and holding them for the long term. The principles outlined in the book are as relevant today as they were during the Great Depression, offering a timeless guide for building lasting wealth.

In conclusion, the main takeaway from this classic text is that investing genius lies not in picking the right stocks but in having a robust analytical framework. By studying financial fundamentals, understanding the true value of businesses, and maintaining a margin of safety, investors can protect their wealth and achieve consistent returns. This disciplined approach, championed by Graham, Dodd, and Klarman, transforms market uncertainty into opportunities for growth and financial clarity.

Good nudge for common sense

The examples tend to be from the 1930's. Just surviving this period in the securities business was a major accomplishment. Simple mean reversion didn't work very well -- anyone who tried it was already gone. Meanwhile the examples are excellent.
Especially the selections on 1920's mortgage backed securities -- yea they had them.

This book showed the brilliance of Benjamin Graham, but you will need some knowledge in accounting before reading this. Must read for value investors wanna be.