Security Analysis (book)
|Author||Benjamin Graham and David Dodd|
|Publisher||Whittlesey House, McGraw-Hill Book Co.|
|ISBN||0-07-144820-9 (2005 edition)|
|LC Class||HG4521 .G67 1934|
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.
Still in use
Security Analysis is still used as a textbook at Columbia. The book also represents the genesis of financial analysis and corporate finance. However, by the 1970s, Graham stopped advocating a careful use of the techniques described in his text for security analysts in selecting individual stock investments, citing that "in the light of the enormous amount of research now being carried on, I doubt whether in most cases such extensive efforts will generate sufficiently superior selections to justify their cost. To that very limited extent I'm on the side of the "efficient market" school of thought now generally accepted by the professors." Graham stated that the average manager of institutional funds could not obtain better results than stock market indexes, since "that would mean that the stock market experts as a whole could beat themselves — a logical contradiction". Regarding portfolio formation, Graham suggested that investors use "a highly simplified" approach that applies one or two criteria to security prices "to assure that full value is present", relying on the portfolio as a whole rather than on individual securities.
Domestic editions of Security Analysis
- 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
- 6th ed. (September 4, 2008) McGraw-Hill (updated with commentary by 10 contributors) - ISBN 0-07-159253-9
- Financial Analysts Journal. A Conversation With Benjamin Graham. 1976.