It is not the first time we spoke in this blog of Benjamin Graham, father of value investing, I don't even think it's the last. This time we have to talk about a book that I consider essential for those already initiated in value investing who want to go further in their training. In this article we will analyze “Security Analysis” by Benjamin Graham and David Dodd, a book that cannot be missing from the library of value investing followers.
Security Analysis technical sheet
- Título: Security Analysis
- Authors: Benjamin Graham and David Dodd
- Publisher: Deusto
- Año: 2.009
- Page: 1.031
Analysis and opinion
Before starting with the commentary on the book, I recommend that you take a look at my article on Benjamin Graham, one of the authors of the book, in which he briefly explained his life, investing style and some of his most famous phrases. The other co-author of the book, David Dodd, was his assistant at Columbia University Business School.
Before I begin, I have to clarify that Security Analysis is not a book that I would recommend for beginning investors. The book is easy to read, but goes into complex concepts that can be confusing for beginners. For this reason, I do not recommend it as a first book to newbies, although it is essential to achieve superior knowledge in investing.
To better understand the focus of the book I refer to the words of Glenn Greenberg:
During my first reading of the book, many years ago, I would have liked to assimilate the prologue of the first edition: "We are mainly interested in concepts, methods, rules, principles and, above all, logical reasoning." The authors weren't interested in writing "Investing for Dummies" or a stock advice chronicle.
The book has the collaboration of a large number of extraordinary value investors who support the quality of its teachings by writing introductions to the different parts of the book. Among them are world-class investors such as Seth Klarman, Bruce Berkovitz or Bruce Greenwald. It also has the prologue of Warren Buffett, which according to his words:
“I was lucky to have Graham and Dodd as teachers. They and this book changed my life. "
The book consists of 52 chapters divided into 8 parts:
- Overview and approach.
- Fixed value investments.
- Preferred financial products of a speculative nature.
- Theory of investment of ordinary shares. The dividend favor.
- Analysis of the income statement. The profit factor in the valuation of ordinary shares.
- Analysis of the balance sheet. Implications of asset values.
- Additional aspects of financial analysis. Discrepancies between price and value.
- Global inversion of values.
Of these 8 parts, I especially recommend the first, the fifth, the sixth and the seventh, which I consider highly recommended to understand value investing both in theory and in practice. However, although I highlight those 4 parts, I have to say that the entire book is worth it.
If I have to define Benjamin Graham's books in one word, it would be sensible, both for The Smart Investor and for Security Analysis. There is nothing in this book that can be considered outside of critical thinking. For that reason the book is so instructive, because its knowledge is very easy to assimilate if you have a proper foundation.
My main complaint about the book and the reason why I don't give it a higher score is because of a problem in the translation that every time I read it it hurt my eyes. The concepts "value investing" and "value investors" are translated as "investment in securities" and "investors in securities" respectively. The correct translation of these terms is "investment in value" and "investors in value", since the term "value" refers to the economic value of an investment, not to a document that grants financial rights, which in English they call "Security". I know that I may seem a bit fussy, but it seems to me a rather serious error in such essential concepts, so I hope that it will be corrected in the next edition of the book by the publisher Deusto, which is also one of my favorites in Spanish. .
Security Analysis valuation
"Security Analysis" by Benjamin Graham is one of those books that I would classify as essential for all value investing followers. It is a comprehensive and very instructive book. Without a doubt, your reading will be an investment that will be rewarded with long-term growth.
- Score: 9
- Medium-high level.
- Recommended to: All people who have a solid base of value investing and an interest in learning to invest in a more advanced way.
Buy it at Amazon