Security Analysis
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Security Analysis, authored by professors Benjamin Graham and David Dodd of Columbia Business School, laid the intellectual foundation for what would later be called value investing. The work was first published in 1934, following unprecedented losses on Wall Street. In summing up lessons learned, Graham and Dodd chided Wall Street for its myopic focus on a company's reported earnings per share, and were particularly harsh on the favored "earnings trends." They encouraged investors to take an entirely different approach by gauging the rough value of the operating business that lay behind the security. Graham and Dodd enumerated multiple actual examples of the market's tendency to irrationally under-value certain out-of-favor securities. They saw this tendency as an opportunity for the savvy.
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[edit] Specifications
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- Genre = Finance
- Publisher = McGraw-Hill
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- Publication Date = 1934
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[edit] Background
At bottom, Security Analysis stands for the proposition that a well-disciplined investor can determine a rough value for a company from all of its financial statements, make purchases when the market inevitably under-prices some of them, earn a satisfactory return, and never be in real danger of permanent loss. Warren Buffett, the only student in Graham's investment seminar to earn an A+, made billions of dollars by methodically and rationally implementing the tenets of Graham and Dodd's book.
Security Analysis is still used as a textbook at Columbia. Security Analysis also represents the genesis of analysis and fundamental analysis. However, in the 1970s Graham stopped advocating a careful use of the techniques described in his text in selecting individidual stocks, citing the extensive efforts and costs required to generate superior returns in a modern efficient market. Instead, Graham later suggested the use of one or two simple criteria to the investor's entire portfolio, focusing on results of the group rather than on individual securities.[1]
[edit] Domestic editions of Security Analysis
- 1st ed. (1934) Whittlesey House (the trade division of McGraw-Hill) - LCCN: 34023635
- Black bound cover (1st printing) was printed by The Maple Press Co., York, PA, for a small distribution in the United States
- Maroon bound cover (2nd printing) was published that same year for sale abroad
- 2nd ed. (1940) McGraw-Hill - LCCN: 40013028
- 3rd ed. (January 1, 1951) McGraw-Hill (last edition while Graham & Dodd were faculty members of Columbia) - LCCN: 2005270180
- 4th ed. (1962) McGraw-Hill (last edition by Graham & Dodd) Charles Sidney Cottle (1910 - 1987) joins as coauthor - LCCN: 62017368
- Reprint 3rd ed. (May 1976) McGraw-Hill ISBN 0-07-023957-6
- 5th ed. (January 1, 1988) McGraw-Hill (updated by Cottle, Murray, and Block) - ISBN 0-07-013235-6
- Reprint 1st ed. (October 1, 1996) McGraw-Hill - ISBN 0-07-024496-0
- Reprint 1st ed. (February 1, 1997) McGraw-Hill - ISBN 0-07-024497-9
- Reprint 2nd ed. (October 10, 2002) McGraw-Hill - ISBN 0-07-141228-X
- Reprint 3rd ed. (December 10, 2004) McGraw-Hill - ISBN 0-07-144820-9
[edit] Movie Citation
The 5th edition of Security Analysis made an appearance in the film, The Pursuit of Happyness. The film is about how Chris Gardner, a single father, climbed out of poverty and realized his dream. One of the multiple themes was that Mr. Gardner never surrendered his responsibility as a father.
The film prominently showed the 5th edition of Security Analysis — black jacket, white, gold, red fonts — as the one that Dean Witter Reynolds required 60 unpaid interns to study for six months. The intern portion of the story is circa 1981; the 5th edition of Security Analysis was published in 1988; therefore, the film production prop department used the wrong edition.
[edit] References
- ^ Financial Analysts Journal. A Conversation With Benjamin Graham. 1976.
