Security Analysis by Benjamin Graham and David Dodd was first published in 1934. It is a fundamental book for serious students of value investing.
Generally, an analyst could conduct a comparative analysis and dig deep into corporate reports to unearth value securities. Mispricing could be found during volatile market conditions in both leading and secondary common stocks. A systematic operation in leading stocks, with specific price multiple guidelines, of buying low and selling high would product satisfactory results. However, that would require a great deal of courage. Nonstandard securities are more subject to wild movements, and thus should be carefully looked at specifically during high general market levels.
Various corporate actions could lead to market mispricing. They include dividend changes, mergers and segregations, litigation, recapitalization, bankruptcy, and reorganization.
In senior securities, seasoned and unseasoned issues could show divergent price behavior in various market conditions. Seasoned issues have more price inertia as they have a favorable position among market participants. This is in contrast to unseasoned issues. So, writers emphasize caution in this area. An analyst should look for absolute attractiveness or direct contractual relationship if judging two issues.
Furthermore, the authors delve into opportunities in related securities either for hedging operations or direct exchange. Forced selling related to nonfundamental factors could also lead to attractive opportunities.
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