Security Analysis: The Classic 1951 Edition (2024)

The 6th edition (which is the 75th anniversary of the 1st edition) has an absolutely wonderful and very heartfelt introduction by Buffett. This is actually a reprint of the 2nd edition but annotated by revered investors/academics, which I enjoyed. I have to warn this is basically a textbook and will come across as very dry. The first few times I read Graham I thought it was very dry but I've acclimated myself to him and now enjoy his writing. Graham is always very careful never to inject any flamboyance in his writings. He is, I believe, at heart a teacher (he taught at Columbia and UCLA for more than 30 years cumatively) but he was also a brilliant money manager. He invented the first hedge fund in the 20's (but doesn't get credit for it). Graham's style is like a scientist, if there is any doubt for a method, he will readily illuminate it for the reader. He is very understated so as not to ever elevate expectations for the student/investor. Getting back to the teacher, he wanted everyone to be able to apply his writings so the book is very quantitative (not heavy in math, just statements that can be delimited). I recommend Fisher for the qualitative. Graham addresses the qualitative in other writings, but the reader will probably pick up he is uncomfortable and/or apathetic with it and limits it as much as possible.

This is 5 stars not simply for the comprehensiveness but the originality. There is a time-period bias for the modern reader. Graham literally invented most of the methods and ideas in the book. He is a modern day Newton whereby he had to invent calculus to explain gravity, Graham invented fundamental investing and provided, if I can borrow from Sagan, a candle in the dark to illuminate the irrationality, ok I paraphrased from Sagan.

Reads very much like a textbook, but a must read for anybody considering stepping outside the world of mutual funds and actually investing in individual companies by using a value based approach. This book will provide the basic tools on how to evaluate the intrinsic value of a company, which is the first step in determining whether a security is a worthy investment. Certainly not an easy read, but well worth the time and effort.

I'm no investor, but I enjoy keeping up with the markets the same way some baseball fans like digging into stats and nerding out on numbers. And that's why I decided to pick up this book and start learning more about value investing from a classic source.

Holy crap, I couldn't put it down and was surprised at just how simple it was. Now I do have training and experience as an accountant, so I wasn't worried about jargon or complicated math... more often than not the math and terms used in the financial industry are employed to turn relatively simple concepts into seemingly complicated and scientific ideas. Surprisingly, this book had almost none of that "look how smart my financial ideas are" type of vibe to it. It had very little jargon beyond the very basic stuff you'd learn in high school economics. I mean there is nothing here but practical advice that anyone should be able to understand.

risk is unavoidable, diversify, dividends are good, look for intrinsic value but still consider the price of common stocks in your final decision... stuff that I think we now take for granted as common sense, but in 1934 was still not lay knowledge.

Overall, if you're like me and want to learn from the ground up, and are more interested in theory, this is the very foundation of contemporary value investment theories

This is a timeless classic. The principles contained in this book have stood the test of time. If you are a serious long-term investor, you have to read this. There's no getting around it. It took me more than 2 months to complete this book and I keep referring to this book from time to time.

A few things to remember from Ben Graham:

•Intrinsic value is not a fixed number. It keeps changing.
•For the proper value to be determined, there must be some stability in the earnings.
•Be careful of the stocks that not easily recognized by the market.
•Mean reversion is more common that anyone thinks.
•Change is something that cannot be factored in, but to watch out for.
•Look for business stability not just in the financial numbers, but also in its quality.
•Focus on what the asset can generate and not for how much it can be sold for in future.
•Price is not the value, it’s your due diligence.
•Even good stocks can be bad investments if you pay too high a price for it.
•Always consider recent changes in the business - are they moving it forward or pushing it backward.

Extremely hard to read, but well worth it.

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.

I feel like this book should be required reading before anyone is allowed to invest in the stock market

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:

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

"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."

"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."

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

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

"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."

"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."

"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."

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!

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."

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.

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)

Security Analysis is not for the amateur or newbie investor wanna be. That being said, I didn't understand approximately 63% of it but the parts I did understand seem to me to be investing wisdom at its finest. If you are a seasoned investor, you will want to read this book and refine your skills. I'll come back to this one.

Absolutely fantastic stuff especially by contributing authors like Warren Buffet, Seth Klarman, etc If you have spent some time in the investing arena and feel out of touch with concepts and thoughts, here we go...

Great book for those who are interested in long-term investments.
Certain understanding of financial reporting is required.

The tome....

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

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

Classic

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.

QUICK TIPS, don't buy the 6th edition by Mc Graw Hill, buy the 2nd edition instead. The 6th edition got a lot of chapters cut out of the book for some unknown reason. I hear that The publisher decided to put those somewhere online and give you the link in an attached CD. I bought the Kindle version and no instruction on how to read those chapters. Pirating those chapters is actually faster than figure out where to download them from the publisher that I bought from, funny.

The focus of the book is on fundamental analysis, specifically, the study of quantifiable factors of securities, e.g. price, earning record, current assets, etc. The book acknowledges the significance of unquantifiable factors like strategy or macroeconomic but didn't discuss those matters in this book.

The book covers a wide range of securities types and the approach to each of them. Graham also discusses the implication behind each of the qualitative factors and how management can manipulate them to distort the truth.

It's undeniable that the lessons in this book are timeless, on the other hand, as expected, the example is quite dated, mostly centered around the railroad, public utilities, and industrial. The critical missing piece here is the service sector where inventory and amortization don't play a major role. Normally this is not an issue but I really hope to see Graham himself reasoning about the companies in the service sectors.

Overall, a wonderful book for investors of all types. If you just started, I suggest reading other writing of Graham first, like The Intelligent Investor, before starting this one.

Oftentimes referred to as the best of the many editions, I wanted to read this version because it was released 10 years after the start of the Great Depression. The 'links' between investing after the 1920s offer some insights into a similar period as investing after the massive technology bubble of the 1990s.

Of course, we did not experience a global depression after the 1990s (due to Greenspan and the Greatest Global Boom of all time), but there are some common threads. In addition, Benjamin Graham is the Father of Value of investing. His students have amassed some of the greatest long-term returns in history (even during the secular bull market of the 1960s and 70s).

A great read for investors.

About the edition:
I read the most recent 6th edition which is essentially an abridged 2nd edition plus some industry gurus' comments on each part and the relevance to today's investment. People also recommend replacing the first part of the 2nd edition with 3rd edition which is more detailed and comprehensive.

I think the 2nd edition flows better than the 3rd. It started with evaluation of company for bond investment and followed by the idea that stock evaluation should be built on the bond evaluation since common stock represents a non-enforceable claim on the company’s cash flows and earnings, which is inherently less safe than bond and relies more on the accuracy of the earning estimation and works with a much leaner margin of safety.

Benjamin Graham is the god father of security analysis or investing if you may. This book is for the serious to very serious investor.

It's heavy - not just the reading but the book itself is hard to hold in one's hand and a lot of the examples are over half a century old.

Graham grew up poor and one incident that took place when he was little changed him forever. His mother was insulted by a banker who questioned her credit worthiness. That went deep into his psyche.

He married four times and spent the last days with his mistress in the South of France, and died a very rich man.

A difficult read but worth it.

Vivek Rajan Vivek
A Great Sage and A Rascal Named Doku
www.vivekrajanvivek.com

The bible of value investing, Security Analysis instructs readers on how to invest -- rather than speculate -- in fixed income and equity securities. The authors appropriately highlight the importance of identifying and investing in good businesses selling at attractive prices relative to their intrinsic valuation. Much of the text, however, gets caught up in lengthy examples that weigh down this tome. Overall, this book reads well although the Intelligent Investor -- also written by Graham and Dodd -- provide a more readable roadmap to the central tenets of value oriented investing.

A clear, oh-so-thorough review of a field in which I have little to no knowledge or expertise. If you have the patience to make it through, it represents a worldview that I find very interesting--you can follow the paper trail to very what has happened, to understand a group of people's decision making in the present, and to make educated guesses as to what could happen in the future. Fascinating.

Read the classic version but found that the thoughts and standards of the time are far outdated from today's. The classic was written at a time when ticker tapes were in place, not when hundreds of billions of institutional funds move in and out of a country or industry equity sector within a week or 2. The principles are still true today as they were when they were first written, but context is what limits me from rating it a full 5!

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.

Czytałam znacznie dłużej, niż Regulamin tłoczni win Irvinga, i to pokazuje mój stosunek do tej książki. Trochę za dużo tu polityki USA z czasów wojny w Wietnamie, trochę za dużo tajemnic na siłę rozwiązywanych w ostatnim momencie i te dłużyzny mnie znudziły. Ale ostatecznie przeczytałam, bo język jednak Irving ma piękny i gładko prowadzi opowieść.

This book has more useful, practical and well reasoned information per page than anything else I've read about investing. It is however a heavy book, both figuratively and literally. It's doubtful whether you can appreciate all of it without already having some meaningful experience. Probably worth reading multiple times over ones investment career.