Security Analysis by Benjamin Graham and David Dodd was first published in 1934. It is a fundamental book for serious students of value investing.
Driven by issues in both the older and newer ways of common stock, Mr. Graham and Mr. Dodd discuss three potential approaches in this chapter.The first relates to general market growth for the indefinite term. The second relates to the selection of individual stocks of favored companies that will likely grow. The third approach is based on the concept of margin of safety.
The authors contend that it is rare to find companies with excellent qualitative factors that are undervalued. However, it is relatively easier to find cheap companies with an average future. The writers disdain to call buying stocks based on short-term prospects, long-term growth or some trend of the market as investments.
Overall, the authors favor the common stock investing approach of buying at a price much lower than the value to the private investor.
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