Security Analysis: The Classic 1940 Edition

"Graham's ideas inspired the investment community for nearly a century."--Smart Money"Graham's method of investing is as relevant today as it was when he first espoused it during the Roaring Twenties."--Investor's Business DailyBenjamin Graham's revolutionary theories have influenced and inspired investors for nearly 70 years. First published in 1934, hisSecurity Analysisis still considered to be the value investing bible for investors of every ilk. Yet, it is the second edition of that book, published in 1940 and long since out of print, that many experts--including Graham proteacute;geacute; Warren Buffet--consider to be the definitive edition. This facsimile reproduction of that seminal work makes available to investors, once again, the original thinking of "this century's (and perhaps history's) most important thinker on applied portfolio investment."

Benjamin Graham was a seminal figure on Wall Street and is widely acknowledged to be the father of modern security analysis. The founder of the value school of investing and founder and former president of the Graham-Newman corporation investment fund, Graham taught at Columbia University's Graduate School of Business from 1928 through 1957. He popularized the examination of price-to-earnings (P/E) ratios, debt-to-equity ratios, dividend records, book values, and earnings growth, and also wrote the popular investors' guide The Intelligent Investor.

David Dodd was a colleague of Benjamin Graham's at Columbia University, where he was an assistant professor of finance.

Preface to the Second Edition

vii

Preface to the First Edition

ix

Introduction

1

(16)

PART I SURVEY AND APPROACH

The Scope and Limits of Security Analysis. The Concept of Intrinsic Value

17

(14)

Fundamental Elements in the Problem of Analysis. Quantitative and Qualitative Factors

31

(15)

Sources of Information

46

(11)

Distinctions between Investment and Speculation

57

(12)

Classification of Securities

69

(8)

PART II FIXED-VALUE INVESTMENTS

The Selection of Fixed-Value Investments

77

(14)

The Selection of Fixed-value Investments: Second and Third Principles

91

(15)

Specific Standards for Bond Investment

106

(11)

Specific Standards for Bond Investment (Continued)

117

(17)

Specific Standards for Bond Investment (Continued)

134

(11)

Specific Standards for Bond Investment (Concluded)

145

(12)

Special Factors in the Analysis of Railroad and Public-utility Bonds

157

(20)

Other Special Factors in Bond Analysis

177

(7)

The Theory of Preferred Stocks

184

(12)

Technique of Selection of Preferred Stocks for Investment

196

(12)

Income Bonds and Guaranteed Securities

208

(12)

Guaranteed Securities (Continued)

220

(15)

Protective Covenants and Remedies of Senior Security Holders

235

(14)

Protective Covenants (Continued)

249

(12)

Preferred-stock Protective Provisions. Mainteance of Junior Capital

261

(13)

Supervision of Investment Holdings

274

(10)

PART III SENIOR SECURITIES WITH SPECULATIVE FEATURES

Privileged Issues

284

(11)

Technical Characteristics of Privileged Senior Securities

295

(13)

Technical Aspects of Convertible Issues

308

(10)

Senior Securities with Warrants. Participating Issues. Switching and Hedging

318

(12)

Senior Securities of Questionable Safety

330

(13)

PART IV THEORY OF COMMON-STOCK INVESTMENT. THE DIVIDEND FACTOR

The Theory of Common-stock Investment

343

(19)

Newer Canons of Common-stock Investment

362

(10)

The Dividend Factor in Common-stock Analysis

372

(17)

Stock Dividends

389

(12)

PART V ANALYSIS OF THE INCOME ACCOUNT. THE EARNINGS FACTOR IN COMMON-STOCK VALUATION

Analysis of the Income Account

401

(15)

Extraordinary Losses and Other Special Items in the Income Account

416

(11)

Misleading Artifices in the Income Account. Earnings of Subsidiaries

427

(18)

The Relation of Depreciation and Similar Charges to Earning Power

445

(20)

Public-utility Depreciation Policies

465

(14)

Amortization Charges from the Investor's Standpoint

479

(27)

Significance of the Earnings Record

506

(15)

Specific Reasons for Questioning or Rejecting the Past Record

521

(9)

Price-earnings Ratios for Common Stocks. Adjustments for Changes in Capitalization

530

(11)

Capitalization Structure

541

(13)

Low-priced Common Stocks. Analysis of the Source of Income

554

(13)

PART VI BALANCE-SHEET ANALYSIS. IMPLICATIONS OF ASSET VALUES

Balance-sheet Analysis. Significance of Book Value

567

(11)

Significance of the Current-Asset Value

578

(16)

Implications of Liquidating Value. Stockholder-management Relationships

594

(17)

Balance-sheet Analysis (Concluded)

611

(24)

PART VII ADDITIONAL ASPECTS OF SECURITY ANALYSIS. DISCREPANCIES BETWEEN PRICE AND VALUE

Stock-option Warrants

635

(13)

Cost of Financing and Management

648

(11)

Some Aspects of Corporate Pyramiding

659

(10)

Comparative Analysis of Companies in the Same Field

669

(15)

Discrepancies Between Price and Value

684

(20)

Discrepancies between Price and Value (Continued)

704

(25)

Appendix

729

(102)

Index

831

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Security Analysis: The Classic 1940 Edition

Summary

Author Biography

Table of Contents

Supplemental Materials