I have tried reading Security Analysis but shipped the book back in large part to time constraints. The first couple of chapters were long and boring. I respect Graham for his contributions in the financial world, but his style of writing is very dull. I plan to read the book when I have more time, but for right now, its on my “read later” list.

Why I currently have no inclination in reading Security Analysis?

1. For starters, The Intelligent Investor is an easier read. At the same time, The Intelligent Investor is half the size and Graham’s style of writing improves.
2. A special 75th anniversary is in the works for Security Analysis.
3. I like to read books in which the examples used are still around
4. I can let others due the reading. (see below)

Chapter Summaries Are Available

I am not lazy, I simply do not have time to read a 700+ page book.  So, I found chapter summaries for Security Analysis on the Barel Karsan blog. The authors have almost completed the book and provide chapter summaries on their blog, a huge time saver!

First the link: Francis Chou
The article brings up an interesting point, a good amount of value investors are lagging the market. The first person that comes to mind is Bill Miller and I believe he is down 19%. Ouch. According to their first quarter shareholder letter, Dodge and Cox is down almost 12% (S&P 500 was down a little over 9%). There are various other value firms who are under performing the market. Have they lost their touch or is it a sign of the times? I believe it’s the latter. One thing about contrarian-value investors is we are usually early to the party and leave early as well. We hate crowds.Just about every “guru” underestimated the magnitude of the housing/credit crisis and their performance reflects it. Mohnish Pabrai and Bill Miller come to mind.

Value investing is a proven strategy that will continue to work in the future. Unfortunately, many of the value investors missed the commodity train and are lagging. In the 90′s, most value investors avoided technology and lagged behind growth and technology funds. Now, not only did they miss the commodity boom, but were early in financials. A double whammy. So what now? Start cherry picking bargains. As the article states, just about every retail business is undervalued. As a matter of fact, Chou mentions Office Depot. Sounds familiar? Not to brag but…… I I wrote about Office Depot wayyyy back on February 24. Anyone reading this blog at the time could have researched the company, watch the stock plummet 20% after “worst than expected earnings”, and buy the stock at $10.xx. The stock is still a bargain and any positive comment made about the economy will push the stock higher.

A particular quote by Chou caught my attention in which he states:

“Look at our long-term record. We have always bounced back.”

Value Investing always bounces back. America always bounces back. It is a matter of being patient and ignoring the current headlines. Andrewc left an interesting comment on a recent post (Gurus Loading Up On Healthcare Stocks) in which he states:

I like seeing how the “gurus” picks are completely different than what the media is buzzing about. All last summer the funds managers were guying natural gas when the talking heads said that was dead money. Now, with gas prices going through the roof and TV programs talking constantly about rising oil prices, you see very few new positions in the energy. They don’t follow the momentum- they already had there positions and are enjoying big profits. And while CNBC and others hype up CHK and others, the gurus quietly move to others areas of value, like Healthcare. Watching when the experts enter and exit positions keep me from getting caught in the herd.

In summary, that’s what contrarian-value investing is all about.
1. Go against the crowd.
2. Wait for crowd to realize they made a mistake
3. Sell to crowd at a significantly higher price

As stated in my response, years from now CNBC will be flashing headlines dealing with financials and retailers. As usual, here is a classic Ben Graham quote that helps out when the headlines news is causing doubt in security analyses

“You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”

• Value Investing: From Graham to Buffett and Beyond- Bruce Greenwald
• The Little Book Of Value Investing-Christopher Browne
• The Intelligent Investor- Benjamin Graham

Lost in the pile are some great books that often get overshadowed by the “well known”. Below is a list of unknowns that should be considered on every value investor’s library.

1. The Rediscovered Benjamin Graham: Selected Writings of the Wall Street Legend- One of many value investing books by Janet Lowe,this gem provides plenty of unknown material by the dean of value investing. As every Benjamin Graham book out there, there is plenty of valuable information to digest.
   
2. Poor Charlie’s Almanack Expanded Second Edition. The Wit and Wisdom of Charles T. Munger- By the man who said he didn’t set out in life to become the assistant leader of a cult, “Poor Charlie’s” allows the world to see how one of the greatest financial minds of our day views the world. Upon reading this masterpiece, one will truly acknowledge the wit and wisdom of Charles T. Munger
3. Psychology and the Stock Market: Investment Strategy Beyond Random Walk by David Dreman- One of the earliest books on behavior finance, David Dreman gives the reader a great primer on bubbles and low P/E investing. If you are looking for a book on fear and greed, look no further.
4. The Five Rules for Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market by Pat Dorsey. Christopher Davis of Davis Advisors summed up the book as, “His (Pat Dorsey) methodology is sound, his examples clear, and his approach timeless.” I highly reccommend this book to anyone who is interested in value investing. The book provides a great introduction into modern day security analysis, valuation, industry analysis, moats, etc..