We hope you enjoyed this episode as much as we did. Please let us know your thoughts in the comments section! IMPORTANT: Please beware of cyber scams & phishing attacks. We have received reports of fake accounts claiming to be affiliated with The Investor's Podcast Network or posing as one of our hosts. Please help us report those suspicious accounts. We will never reach out to you for any business or investment opportunity. Stay vigilant!
If someone reads Security Analysis today, and they would not know when and by whom book was written. They will not be taken back in time. It is written in modern mentally. When I read it, I was bewildered, that analogy didn't not change. Analysis is analysis. That's how I feel. Graham, also talked negatively about analysts. He said, do not trust them. They know nothing. LoL He was so correct.
Also, different editions are written at different stages of the business cycle, equity booms and crashes, bond booms and crashes due to different interest rate levels, and so on, so each edition yields its own wisdom for the particular events that happened in the intervening period between each.
You have to read the 4th 1962 Edition. It is the only edition that is valid in this modern market! Not the 2nd Edition (6th. Edition and 7th. Edition.)! The 6th. and 7th. Editions are actually the 1940 2nd. Edition with chapters removed. It is not the 1934 First Edition. However, if you read the preface of the 1951 3rd. Edition, Dodd says that they removed a lot of obsolete information that had been made obsolete by WWII and the establishment of the SEC, which made much of the information about corporate abuses prior to 1940 completely obsolete, and completely new material on Stockholder-Management relations. The reforms enacted by the SEC were ""sweeping and efficatious". If you want to read the best Edition of Security Analysis, you should read the 4th. 1962 Edition. The 5th Edition was completely rewritten, based on the 4th. Edition, so has virtually nothing left of the original Dodd text. The 1934 First Edition, 1940 Second Edition, and 1951 Third Edition are all available in reprint. The 6th Edition is a rip-off with partial reproduction of the 1940 Second Edition. The Good content of the 6th. and 7th. Editions is the Updated Commentary by Klarman, Grant, Lowenstein, Marks, Merkin, Berkowitz, Greenburg, Greenwald, Abrahams and Russo. The best Edition is by far the Fourth 1962 Edition, that has not yet been reproduced. This was the Text Book of the Association of Security Analysts. The Preface of the 3rd. Edition states: "This third edition of security analysis is more a rewriting than a revision of our work. The major changes have extended not only to content and arrangement, but even to the authorship. We have been fortunate in obtaining the collaboration of Charles Tatham Jr. He has written the chapters on analysis of public utility statements and on the valuation of public utility common stocks - fields in which he has specialized for many years. In addition he has made many valuable suggestions related to other subjects. On the side of arrangement, a basic change has been the placing of all the material on income-account and balance-sheet analysis in the early part of the book, before dealing with the selection of stable-value investments. We believe the new order corresponds more closely to the actual development of the practicing security analyst. On the side of content, our basic change has been the expansion of our earlier ideas in common-stock appraisal into a fully developed technique, occupying a substantial section of the book. This step reflects not only the progress of our own thinking on the subject since 1940, but also the considerable body of experience that has been accumulated in the field of security valuations, particularly those of public-utility common stocks. It is off you've told him at the every complete analysis of a common stock, viewed from the investment standpoint, will include arrange a valuation or appraisal of the issue. Another significant modification of our approach lies in the dropping of nearly all the detailed references to the corporate abuses prior to 1940; the space saved has made possible the expansion into a full division of the book of the material on shareholder end management relations. This change reflects of shifting the nature of the investment problems growing out of the purchase and ownership of securities. Prior to the creation of the Securities & Exchange Commission, the more pressing problems grew out of the inadequacy or misleading character of corporate information, and manipulation of security supposing corporate set ups and on the market. The reforms in these areas have been sweeping and efficacious. It is a source of satisfaction to note that the great majority of the abuses to which we called attention in the 1st (1934) edition of this work have now all but disappeared. In turn, this cleansing of the financial stables, coupled with the improvement in the financial condition of the typical enterprise, has largely improved the investment status of common stocks, viewed as a whole. The common-stock investor, when he faces corporate problems, it is likely to find them now in the areas of (1) competence of management and (2) policies of management towards stockholders - notably in the matter of dividends. We believe that in the future the trained security analyst Will be called upon to assist in the resolution of such controversial matters. No new sections devoted to this subject, we have endeavored to shed light on the basic issues here involved and on the attitudes and techniques required to deal with them."
The 6th Edition is actually the 1940 2nd. Edition with chapters removed. It is not the 1934 First Edition. However, if you read the preface of the 1951 3rd. Edition, Dodd says that they removed a lot of obsolete information that had been made obsolete by WWII and the establishment of the SEC, which made much of the information about corporate abuses prior to 1940 completely obsolete, and completely new material on Stockholder-Management relations. The reforms enacted by the SEC were ""sweeping and efficatious". If you want to read the best Edition of Security Analysis, you should read the 4th. 1962 Edition. The 5th Edition was completely rewritten, so has virtually nothing left of the original Dodd text. The 1934 First Edition, 1940 Second Edition, and 1951 Third Edition are all available in reprint. The 6th Edition is a rip-off with partial reproduction of the 1940 Second Edition. The Good content of the 6th Edition is the Updated Commentary by Klarman, Grant, Lowenstein, Marks, Merkin, Berkowitz, Greenburg, Greenwald, Abrahams and Russo. The best Edition is by far the Fourth 1962 Edition, that has not yet been reproduced. This was the Text Book of the Association of Security Analysts. You have to read the Updates.
@@baba10ye The Preface of the 4th. Edition states, “The three previous editions of Security Analysis were published in 1934, 1940, and 1951. Like this (the 4th.) volume, they dealt with three main topics: (1) the orderly, comprehensive, and critical analysis of a company's income account and balance sheet; (2) the formulation of appropriate criteria for the selection of well-protected bonds and preferred stocks, and (3) approaches to the selection of common stocks for investment purposes. It does not seem to us that the first two divisions present any new difficulties of great magnitude, or require significant changes in our handling of them. But we cannot say the same about common-stock investment. All our previous editions were written and published under market conditions quite different from those of 1960-61. On the former occasions it was possible to combine conservative investment principles with a generally favorable attitude toward the current purchase of common stocks. In the original (1934) publication our cautious view-point was almost compulsory, in the light of the 1929-1932 debacle. In fact it took a certain amount of courage for us to assert that there was such a thing as sound investment in common stocks. When we revised the book in 1940 we had benefit of the market decline of 1937-1938 to justify our conservative standards, and they were similarly acceptable in 1951 after the bear market of 1946-1949. This perhaps fortuitous concordance enabled us to maintain virtually unchanged through the three editions certain criteria of a "reasonable price" at which a given common stock or group of stocks might be bought for investment. These criteria took into account the wide fluctuations of former stock markets; they leaned heavily on average earnings for a number of past years; they established upper limits for a permissible price in relation to such earnings. Favorable possibilities of future growth were to be looked for and taken advantage of when feasible; but the investor - as distinguished from the speculator - was to keep the premium paid for such prospects within a modest maximum. We did not claim that these conservative criteria of "value" or "justified price" proceeded from mathematical laws or other a priori principles. They were definitely empirical in their origin. True, they sounded plausible enough when viewed on the light of experience, but it was their conformity with the long-term behavior of the stock market that gave them most of their authority. We might say that our principles and measures of common-stock investment worked out quite well in practice during the two decades following 1934. Beginning sometime in 1955, our value standards and the actual market level parted company, and the gap has tended to widen through the ensuing years. Thus we are not able to proceed in 1960-1961 with the same comforting assurance as formally that our standards are in accordance with both long-term and recent-term experience. In this respect we face a three-pronged dilemma, which we share with all serious-minded security analysts. If we persist in clinging to our old, highly conservative standards of common-stock appraisal, we risk not only the certain charge of old-fogeyism, but a real possibility of failing to recognize important changes in the underlying structure of common-stock values. If, at the other extreme, we embrace the general optimism and adopt the long-term expectations of high and virtually interrupted earnings growth which are used to justify the market quotations of 1960-1961, we would surely be repeating the practices, and probably repeating the errors, of former bull markets. Finally, if we adopt some middle ground and raise our standards of value to some "compromise position," we shall satisfy neither the prevalent views of the investment community nor the critically minded who insist that standards be justified by hewing close to past experience, or by employing persuasive theoretical reasoning. We deal with this problem in the only way that seems practical to us-by formulating our value standards, and you in accordance with our best judgement, and by presenting these results to the reader, for what they are. He may accept, reject, or modify them as he decides.
@@baba10ye At this point, we should add a word of caution. We believe that there are sound reasons for anticipating that the stock market will value corporate earnings and dividends more liberally in the future than it did before 1950. We also believe there are sound reasons for giving more weight than we have in the past to measuring current investment value in terms of the expectations of the future. But we fully recognize that both views lend themselves to dangerous abuses. The latter has particularly been a cause of excessively high stock prices in past bull markets. However, the danger lies not so much in the emphasis on the future earnings as on a lack of standards used in relating earnings growth to current values. Without standards no rational method of value measurement is possible. In connection with the reformulation of our value standards, two points are to be made. First, the post-World War II world has been categorized as "brave" and "new." Brave it is, indeed, but we are not positive that it is equally new. While we recognize marked contrasts with the decade of the thirties, we can be skeptical about a complete break with the past. The government has assumed large responsibilities in preventing or remedying mass unemployment. This Federal involvement is a new factor, and we consider it important in its potential effect on the business cycle and on stock values. But other considerations, such as inflation, and the population "explosion," are by no means as new as many think. To assist the student in reaching his own conclusions as to the relation between the future, and the longer past (an essential task) the "historical record" has been expanded and set forth in much more detail. In this connection, the economic factors which concern the investor most immediately are reviewed over the period since 1900 As far as available data make the investigation possible. In addition, numerous references are provided to basic studies bearing on specific aspects of the record. We encourage the student to delve into these references. He may fine, not only his perspective sharpened, but also some of today's sacred balls scored. Second, the reformulation of our views on common-stock investing has resulted in broadening the portions of the book which deal with trends and with growth stocks. The importance of these two subjects needs no re-emphasis. Here, again, in the hopes of assisting the student towards his own decision, we have cited more than formerly the writings of others on the subjects. To keep the book's length within bounds we have condensed our former chapters on stockbroker-management relations, and we have relegated some material to the Appendix. Our title page notes the advent of the new principal author, Sydney Cottle, who has taken a major part of the work of revision from the shoulders of its original authors. We are happy to retain the collaboration of Charles Tatham, who is responsible for the chapters on public utility analysis and his rendered other aid. We acknowledge with deep thanks for physical help and kind indulgence accorded by Stamford Research Institute, which has granted Dr. Cottle leave from his institute duties. Others, who helped with former additions, are remembered with gratitude. The preface to the 1951 edition closed with the following paragraph: "Our final word is addressed to the student - reader who may be planning to make security analysis his calling, and to whom we have ventured to dedicate this third edition. Security analysis is on the verge of attaining some measure of formal recognition as a professional discipline. It will demand better training and more rigorous thinking from its members than it has done in the past. We think it offers rewards fully commensurate with its demands and responsibilities. The "average" analyst will probably fare about the same as the average member of any other profession. But for the outstanding man - Who combines native ability, a flair for the subject, and courageous, independent spirit - the sky is the limit." Since 1951 a profession has made great strides in numbers, capabilities, and influence. We wish it even greater success in the years ahead. Benjamin Graham David L Dodd Sidney Cottle Charles Tatham Footnote: We ask the reader to bear in mind that our manuscript was virtually completed and this preface drafted toward the end of 1961, when prevailing sentiment was in strong disagreement with our conservative position.” i.e. Bear Markets of 1937, 1940, and 1951 vs. Bull Market of 1960 !!! The 4th. Edition is far more in keeping with the modern world of the ‘80s, Y2k, 2008 GFC and current post-COVID market we find ourselves in.
We hope you enjoyed this episode as much as we did. Please let us know your thoughts in the comments section!
IMPORTANT: Please beware of cyber scams & phishing attacks. We have received reports of fake accounts claiming to be affiliated with The Investor's Podcast Network or posing as one of our hosts. Please help us report those suspicious accounts. We will never reach out to you for any business or investment opportunity. Stay vigilant!
If someone reads Security Analysis today, and they would not know when and by whom book was written. They will not be taken back in time. It is written in modern mentally. When I read it, I was bewildered, that analogy didn't not change. Analysis is analysis. That's how I feel.
Graham, also talked negatively about analysts. He said, do not trust them. They know nothing. LoL
He was so correct.
Thank you for watching!
would you guys say one would require an MBA or an econ/finance degree to Stand a chance with book
Also, different editions are written at different stages of the business cycle, equity booms and crashes, bond booms and crashes due to different interest rate levels, and so on, so each edition yields its own wisdom for the particular events that happened in the intervening period between each.
You have to read the 4th 1962 Edition. It is the only edition that is valid in this modern market! Not the 2nd Edition (6th. Edition and 7th. Edition.)!
The 6th. and 7th. Editions are actually the 1940 2nd. Edition with chapters removed. It is not the 1934 First Edition. However, if you read the preface of the 1951 3rd. Edition, Dodd says that they removed a lot of obsolete information that had been made obsolete by WWII and the establishment of the SEC, which made much of the information about corporate abuses prior to 1940 completely obsolete, and completely new material on Stockholder-Management relations. The reforms enacted by the SEC were ""sweeping and efficatious".
If you want to read the best Edition of Security Analysis, you should read the 4th. 1962 Edition. The 5th Edition was completely rewritten, based on the 4th. Edition, so has virtually nothing left of the original Dodd text. The 1934 First Edition, 1940 Second Edition, and 1951 Third Edition are all available in reprint. The 6th Edition is a rip-off with partial reproduction of the 1940 Second Edition. The Good content of the 6th. and 7th. Editions is the Updated Commentary by Klarman, Grant, Lowenstein, Marks, Merkin, Berkowitz, Greenburg, Greenwald, Abrahams and Russo. The best Edition is by far the Fourth 1962 Edition, that has not yet been reproduced. This was the Text Book of the Association of Security Analysts.
The Preface of the 3rd. Edition states:
"This third edition of security analysis is more a rewriting than a revision of our work. The major changes have extended not only to content and arrangement, but even to the authorship. We have been fortunate in obtaining the collaboration of Charles Tatham Jr. He has written the chapters on analysis of public utility statements and on the valuation of public utility common stocks - fields in which he has specialized for many years. In addition he has made many valuable suggestions related to other subjects.
On the side of arrangement, a basic change has been the placing of all the material on income-account and balance-sheet analysis in the early part of the book, before dealing with the selection of stable-value investments. We believe the new order corresponds more closely to the actual development of the practicing security analyst. On the side of content, our basic change has been the expansion of our earlier ideas in common-stock appraisal into a fully developed technique, occupying a substantial section of the book. This step reflects not only the progress of our own thinking on the subject since 1940, but also the considerable body of experience that has been accumulated in the field of security valuations, particularly those of public-utility common stocks. It is off you've told him at the every complete analysis of a common stock, viewed from the investment standpoint, will include arrange a valuation or appraisal of the issue.
Another significant modification of our approach lies in the dropping of nearly all the detailed references to the corporate abuses prior to 1940; the space saved has made possible the expansion into a full division of the book of the material on shareholder end management relations. This change reflects of shifting the nature of the investment problems growing out of the purchase and ownership of securities. Prior to the creation of the Securities & Exchange Commission, the more pressing problems grew out of the inadequacy or misleading character of corporate information, and manipulation of security supposing corporate set ups and on the market. The reforms in these areas have been sweeping and efficacious. It is a source of satisfaction to note that the great majority of the abuses to which we called attention in the 1st (1934) edition of this work have now all but disappeared. In turn, this cleansing of the financial stables, coupled with the improvement in the financial condition of the typical enterprise, has largely improved the investment status of common stocks, viewed as a whole.
The common-stock investor, when he faces corporate problems, it is likely to find them now in the areas of (1) competence of management and (2) policies of management towards stockholders - notably in the matter of dividends. We believe that in the future the trained security analyst Will be called upon to assist in the resolution of such controversial matters. No new sections devoted to this subject, we have endeavored to shed light on the basic issues here involved and on the attitudes and techniques required to deal with them."
So much informative video pls make
A video on The most important thing by Haward marks
The 6th Edition is actually the 1940 2nd. Edition with chapters removed. It is not the 1934 First Edition. However, if you read the preface of the 1951 3rd. Edition, Dodd says that they removed a lot of obsolete information that had been made obsolete by WWII and the establishment of the SEC, which made much of the information about corporate abuses prior to 1940 completely obsolete, and completely new material on Stockholder-Management relations. The reforms enacted by the SEC were ""sweeping and efficatious". If you want to read the best Edition of Security Analysis, you should read the 4th. 1962 Edition. The 5th Edition was completely rewritten, so has virtually nothing left of the original Dodd text. The 1934 First Edition, 1940 Second Edition, and 1951 Third Edition are all available in reprint. The 6th Edition is a rip-off with partial reproduction of the 1940 Second Edition. The Good content of the 6th Edition is the Updated Commentary by Klarman, Grant, Lowenstein, Marks, Merkin, Berkowitz, Greenburg, Greenwald, Abrahams and Russo. The best Edition is by far the Fourth 1962 Edition, that has not yet been reproduced. This was the Text Book of the Association of Security Analysts. You have to read the Updates.
So the 4th and the 5th is a copy of that as the last and new and up to date version
@@baba10ye The Preface of the 4th. Edition states,
“The three previous editions of Security Analysis were published in 1934, 1940, and 1951. Like this (the 4th.) volume, they dealt with three main topics: (1) the orderly, comprehensive, and critical analysis of a company's income account and balance sheet; (2) the formulation of appropriate criteria for the selection of well-protected bonds and preferred stocks, and (3) approaches to the selection of common stocks for investment purposes. It does not seem to us that the first two divisions present any new difficulties of great magnitude, or require significant changes in our handling of them. But we cannot say the same about common-stock investment.
All our previous editions were written and published under market conditions quite different from those of 1960-61. On the former occasions it was possible to combine conservative investment principles with a generally favorable attitude toward the current purchase of common stocks. In the original (1934) publication our cautious view-point was almost compulsory, in the light of the 1929-1932 debacle. In fact it took a certain amount of courage for us to assert that there was such a thing as sound investment in common stocks. When we revised the book in 1940 we had benefit of the market decline of 1937-1938 to justify our conservative standards, and they were similarly acceptable in 1951 after the bear market of 1946-1949.
This perhaps fortuitous concordance enabled us to maintain virtually unchanged through the three editions certain criteria of a "reasonable price" at which a given common stock or group of stocks might be bought for investment. These criteria took into account the wide fluctuations of former stock markets; they leaned heavily on average earnings for a number of past years; they established upper limits for a permissible price in relation to such earnings. Favorable possibilities of future growth were to be looked for and taken advantage of when feasible; but the investor - as distinguished from the speculator - was to keep the premium paid for such prospects within a modest maximum. We did not claim that these conservative criteria of "value" or "justified price" proceeded from mathematical laws or other a priori principles. They were definitely empirical in their origin. True, they sounded plausible enough when viewed on the light of experience, but it was their conformity with the long-term behavior of the stock market that gave them most of their authority. We might say that our principles and measures of common-stock investment worked out quite well in practice during the two decades following 1934.
Beginning sometime in 1955, our value standards and the actual market level parted company, and the gap has tended to widen through the ensuing years. Thus we are not able to proceed in 1960-1961 with the same comforting assurance as formally that our standards are in accordance with both long-term and recent-term experience. In this respect we face a three-pronged dilemma, which we share with all serious-minded security analysts. If we persist in clinging to our old, highly conservative standards of common-stock appraisal, we risk not only the certain charge of old-fogeyism, but a real possibility of failing to recognize important changes in the underlying structure of common-stock values. If, at the other extreme, we embrace the general optimism and adopt the long-term expectations of high and virtually interrupted earnings growth which are used to justify the market quotations of 1960-1961, we would surely be repeating the practices, and probably repeating the errors, of former bull markets. Finally, if we adopt some middle ground and raise our standards of value to some "compromise position," we shall satisfy neither the prevalent views of the investment community nor the critically minded who insist that standards be justified by hewing close to past experience, or by employing persuasive theoretical reasoning.
We deal with this problem in the only way that seems practical to us-by formulating our value standards, and you in accordance with our best judgement, and by presenting these results to the reader, for what they are. He may accept, reject, or modify them as he decides.
@@baba10ye At this point, we should add a word of caution. We believe that there are sound reasons for anticipating that the stock market will value corporate earnings and dividends more liberally in the future than it did before 1950. We also believe there are sound reasons for giving more weight than we have in the past to measuring current investment value in terms of the expectations of the future. But we fully recognize that both views lend themselves to dangerous abuses. The latter has particularly been a cause of excessively high stock prices in past bull markets. However, the danger lies not so much in the emphasis on the future earnings as on a lack of standards used in relating earnings growth to current values. Without standards no rational method of value measurement is possible.
In connection with the reformulation of our value standards, two points are to be made. First, the post-World War II world has been categorized as "brave" and "new." Brave it is, indeed, but we are not positive that it is equally new. While we recognize marked contrasts with the decade of the thirties, we can be skeptical about a complete break with the past. The government has assumed large responsibilities in preventing or remedying mass unemployment. This Federal involvement is a new factor, and we consider it important in its potential effect on the business cycle and on stock values. But other considerations, such as inflation, and the population "explosion," are by no means as new as many think. To assist the student in reaching his own conclusions as to the relation between the future, and the longer past (an essential task) the "historical record" has been expanded and set forth in much more detail. In this connection, the economic factors which concern the investor most immediately are reviewed over the period since 1900 As far as available data make the investigation possible. In addition, numerous references are provided to basic studies bearing on specific aspects of the record. We encourage the student to delve into these references. He may fine, not only his perspective sharpened, but also some of today's sacred balls scored.
Second, the reformulation of our views on common-stock investing has resulted in broadening the portions of the book which deal with trends and with growth stocks. The importance of these two subjects needs no re-emphasis. Here, again, in the hopes of assisting the student towards his own decision, we have cited more than formerly the writings of others on the subjects. To keep the book's length within bounds we have condensed our former chapters on stockbroker-management relations, and we have relegated some material to the Appendix.
Our title page notes the advent of the new principal author, Sydney Cottle, who has taken a major part of the work of revision from the shoulders of its original authors. We are happy to retain the collaboration of Charles Tatham, who is responsible for the chapters on public utility analysis and his rendered other aid. We acknowledge with deep thanks for physical help and kind indulgence accorded by Stamford Research Institute, which has granted Dr. Cottle leave from his institute duties. Others, who helped with former additions, are remembered with gratitude.
The preface to the 1951 edition closed with the following paragraph:
"Our final word is addressed to the student - reader who may be planning to make security analysis his calling, and to whom we have ventured to dedicate this third edition. Security analysis is on the verge of attaining some measure of formal recognition as a professional discipline. It will demand better training and more rigorous thinking from its members than it has done in the past. We think it offers rewards fully commensurate with its demands and responsibilities. The "average" analyst will probably fare about the same as the average member of any other profession. But for the outstanding man - Who combines native ability, a flair for the subject, and courageous, independent spirit - the sky is the limit."
Since 1951 a profession has made great strides in numbers, capabilities, and influence. We wish it even greater success in the years ahead.
Benjamin Graham
David L Dodd
Sidney Cottle
Charles Tatham
Footnote: We ask the reader to bear in mind that our manuscript was virtually completed and this preface drafted toward the end of 1961, when prevailing sentiment was in strong disagreement with our conservative position.”
i.e. Bear Markets of 1937, 1940, and 1951 vs. Bull Market of 1960 !!!
The 4th. Edition is far more in keeping with the modern world of the ‘80s, Y2k, 2008 GFC and current post-COVID market we find ourselves in.
Brilliant podcast subscribed.
Thank you for your kind words, @MultiLex101.