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!

To keep from falling under the same frame of mind, I have decided to reinforce the idea that right now is the time to be patient, look for opportunities and not panic. To keep busy, I am re-reading the contrarian investing bible. The book might have collected a little dust, but the information is in a league of its own.

A common question among value investors is whether The Intelligent Investor and Security Analysis are worth reading? This question stems from the idea that both books have the perception of being “dated” and thus the information is irrelevant. Many of the companies mentioned in both books might not exist today, but the content on investments and investor behavior are relevant today as when they were first written. In fact, its scary to see how not much has changed in terms of Mr.Market and his wild mood swings. Since I do not have time to re-read The Intelligent Investor, I have spent my time reading  the two most important chapters in value investing, Chapters 8 and 20 of The Intelligent Investor.

What Warren Buffett has to say about the two chapters:

“If you follow the behavioral and business principles that Graham advocates- and if you pay special attention to the invaluable advice in Chapters 8 and 20- you will not get a poor result from your investments.” -Warren Buffett

Chapter 8 – The Investor and Market Fluctuations

“Every investor who owns common stocks must expect to see them fluctuate in value over the years”- p.195

“If he is the right kind of investor he will take added satisfaction from the thought that his operations are exactly opposite from those of the crowd” p.197 (early signs of contrarian investing)

“The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage.That man, would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other person’s mistakes of judgment.”- p. 203

“Let us close this section with something in the nature of parable. Imagine that in some private business you own a small shares that cost you $1,00. One of your partners, named Mr. Market, is very obliging indeed. Every day he tells you what he thinks your interest is worth and furthermore offers either to buy you out or to sell you an additional interest on that basis. Sometimes his idea of value appears plausible and justified by business developments and prospects as you know them. Often, on the other hand, Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly.” -p 205

Chapter 20- “Margin of Safety” as the Central Concept of Investment

” We say that to have a true investment there must be present a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience”  p.520

“Investment is most intelligent when it is most businesslike“- p.523

“To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.”- p.524

Obviously, the quotes above are only a small sample of the brilliance of Graham’s writings. I could easily pull 20 quotes from each chapter. I highly suggest re-reading the two chapters to see how relevant the information is today as they were back when Benjamin Graham wrote them.Finally, the above  page numbers are from Jason Zweig’s edition of The Intelligent Investor.

Value Investors were left disappointed as they felt the last edition of Security Analysis, authored by Cottle, Murray, and Block, had very little “Graham and Dodd” left in it. Even the first edition of Security Analysis receives criticism for being published in an era where bargain were plentiful due to the Great Depression. Thus, Value Investor’s are left with the 2nd,3rd and 4th editions of Security Analysis to satisfy their Graham and Doddism. Nevertheless, I am impressed with the lineup McGraw-Hill has selected for the 75th Anniversary edition which will include a forward by Warren Buffett. This lineup might rival that of the 1927 New York Yankees, arguably the greatest baseball team ever assembled which included names like Ruth, Gehrig, Cobs, Koenig, Meusel, Lazzeri. So who will step up to the plate? (pun intended)……

• Seth Klarman, presindent of Boston’s The Baupost Group and author of a really expensive book.
• Bruce Greenwald, Professor of Finance and Asset Management at Colombia’s Business School and author of Value Investing: From Graham to Buffett and Beyond
• J. Ezra Merkin, Gabriel Capital Group
• Bruce Berkowitz, Fairholme Capital Management
  
• Glenn Greenberg, Chieftain Capital Management
• David Abrams, Abrams Capital Management
• Thomas Russo, Gardner Russo & Gardner, will write about global value investing

One of the criticisms of Security Analysis has always been that the style of writing is very vague. I agree. But, included in the list of authors and is not mentioned above is Roger Lowenstein author of Buffett: The Making of an American Capitalist, which in my opinion is the best Warren Buffett biography around.

Many value investors already have a copy of Security Analysis on their library. I think this edition will not be disappointed based on the lineup McGraw-Hill has assigned to update the book. The names listed above, and those not listed, are well known in their respected fields and bring years of practice to the table. I am especially looking forward to the forward by Warren Buffett. His introduction in The Intelligent Investor is a classic in my opinion and has set the bar high for his introduction in Security Analysis.