Security Analysis by Benjamin Graham and David Dodd was first published in 1934. It is a fundamental book for serious students of value investing.
In chapter 2, Mr. Graham and Mr. Dodd delve into various elements that govern the purpose of security analysis. They lay out the major factors that enter into the analysis.
Through various examples, the authors depict that just because a company looks sound doesn't mean its securities are sound investments. An analyst should carefully analyze the specifics of the security, the security's relative standing, and the price. However, a person's personal situation such as investment training should be considered. For example, it might not be wise for "untrained eyes" to ever invest in low-grade enterprises.
Mr. Graham and Mr. Dodd assert the importance of both qualitative and quantitative factors in the analysis. The writer's main point is that analysis inference should be primarily drawn from quantitative factors. However, those conclusions could be tarnished by qualitative factors. Thus, the analyst should give substantial importance to the qualitative factor of stability of the enterprise.
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