Blog Roll: Howard Lindzon | Phil Pearlman | StockTwits Network

Chapter 1: Introduction.

I have dedicated myself to a year-long study of Benjamin Graham's book Security Analysis.  Currently, I'm studying:

Part I: Survey and Approach
Chapter 1: Introduction.  The Array of Securities.  Economic Background.

(page 1) The objectives of security analysis are twofold.  First, it seeks to present the important facts regarding a stock or bond issue, in a manner most informing and useful to an actual or potential owner.  Second, it seeks to reach dependable conclusions, based upon the facts and applicable standards, as to the safety and attractiveness of a given security at the current or an assumed price.

(page 1) To do these jobs creditably the analyst needs a wide equipment:

  • He must understand security forms,
  • Corporate accounting,
  • The basic elements that make for the success or failure of various kinds of businesses,
  • The general workings of our economy,
  • And finally the characteristics of our security markets.
(page 1) He must be able to:
  • Dig for facts,
  • To evaluate them critically,
  • And to apply his conclusions with good judgment and a fair amount of imagination.
(page 1) He must be able to resist human nature itself sufficiently to mistrust his own feelings when they are part of mass psychology.  He must have courage commensurate with his competence.

(page 1) Security analysis [is] a systematic activity, with practical objectives.

(page 3) The soundness of a security purchase is determined by future developments and not by past history or statistics.  But the future cannot be analyzed; we can seek only to anticipate it intelligently and to prepare for it prudently.

(page 8) The matters that concern the investor most immediately are (1) the general price level, (2) interest rates, (3) business profits, (4) dividends, and (5) security-price movements.
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