Security Analysis (book)
4th edition, 1962 printing
|Author(s)||Benjamin Graham & David Dodd|
|Dewey Decimal||332.63/2042/0973 22|
|LC Classification||HG4521 .G67 2005|
Security Analysis is a book written by professors Benjamin Graham and David Dodd of Columbia Business School, which 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.
Fundamentally, 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 millions of dollars by methodically and rationally implementing the tenets of Graham and Dodd's book early in his career..
Security Analysis is still used as a textbook at Columbia. The book also represents the genesis of financial analysis and fundamental analysis. However, in the 1970s Graham stopped advocating a careful use of the techniques described in his text in selecting individual stocks, 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." Instead, he later suggested the use of one or two simple criteria for the investor's entire portfolio, focusing on results of the group 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
- Alice Schroeder: "The Snowball: Warren Buffett and the Business of Life", Page 149. Random House Large Print, 2008.
- Financial Analysts Journal. A Conversation With Benjamin Graham. 1976.