Introduction
The Intelligent Investor is a book of American author Benjamin Graham and published on 1949. Benjamin Graham was a British-born American economist, professor and investor. He is widely known as the “father of value investing”, and wrote two of the founding texts in neoclassical investing: Security Analysis, and The Intelligent Investor. The genre of this book Value Investing, Non-fiction. The book teaches readers strategies on how to successfully use value investing in the stock market. Historically, the book has been one of the most popular books on investment and remains Graham’s legacy. We have brought you a summary of ‘The Intelligent Investor’. So let’s turn on again. (The Intelligent Investor Summary)
Summary
Contents
- Investment versus Speculation: Results to Be Expected by the Intelligent Investor
- The Investor and Inflation
- A Century of Stock Market History: The Level of Stock Market Prices in Early 1972
- General Portfolio Policy: The Defensive Investor
- The Defensive Investor and Common Stocks
- Portfolio Policy for the Enterprising Investor: Negative Approach
- Portfolio Policy for the Enterprising Investor: The Positive Side
- The Investor and Market Fluctuations
- Investing in Investment Funds
- The Investor and His Advisers
- Security Analysis for the Lay Investor: General Approach
- Things to Consider About Per-Share Earnings
- A Comparison of Four Listed Companies
- Stock Selection for the Defensive Investor
- Stock Selection for the Enterprising Investor
- Convertible Issues and Warrants
- Four Extremely Instructive Case Histories and more
- A Comparison of Eight Pairs of Companies
- Shareholders and Managements: Dividend Policy
- “Margin of Safety” as the Central Concept of Investment
Benjamin Graham is regarded as the father of value investing and his book The Intelligent Investor is highly regarded by the public and remains that way.
Value investment
Graham’s main investment approach outlined in Intelligent Investor is that of value investing. Value investing is an investment strategy that targets undeclared shares of companies that have the potential as businesses to perform well in the long run. Value investing is not related to short-term trends in the market or the daily movement of stocks. The reason for this is that price investment strategies assume that price changes go away in the short term, without taking into account the company’s core principles for long-term growth in the market. In its most basic terms, value investing is based on the premise that if you know the true value of a stock, you can save a lot of money if you can buy that stock on sale.
Mr. Market
One of Graham’s important accusations, Mr. Market, is to express the irrationality of the stock market and the group-view. Mr. Market is a compassionate partner who offers to buy or sell his shares at a different price at the door of a shareholder every day. Often, the price quoted by Mr. Market seems laudable, but sometimes it is ridiculous. The investor is free to trade his quoted price and trade with it, or to ignore it altogether. Mr. Market has no objection to this, and will return the next day to quote another price.
The point of this anecdote is that the investor should not consider the craze of Mr. Market as a determining factor in the value of his shares. He should benefit from the stupidity of the market instead of participating in it. A common downfall in the market is that investors are fair and consistent, but Mr. Market serves to show that it is not. Investors are advised to focus on the real-life performance of their companies and are concerned with Mr. Market’s often irrational behavior rather than receiving dividends.
Value determination
At Intelligent Investor, Graham explains the importance of setting value when investing. To successfully invest for value and avoid participating in short-term market fluctuations, it is necessary to determine the value of companies. To determine the value, investors use fundamental analysis. Mathematically, the value can be determined by multiplying the estimated earnings over a few years of the capitalization factor of a company and then comparing the actual price of a share. Five factors are involved in determining the capitalization factor, which are long-term growth prospects, quality of management, financial strength and capital structure, dividend record and current dividend rate. To understand these factors, value investors look at a company’s financials, such as annual reports, cash flow statements and EBITDA, and forecasts and performance of company executives. This information is available online because it is required by the SEC for each public company. (Credit)
Some quotes we all need to know
“An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
Benjamin Graham
The Intelligent Investor
“Intelligence has nothing to do with IQ or SAT scores. It simply means being patient, disciplined, and eager to learn.”
Benjamin Graham
The Intelligent Investor
On the other hand, investing is a unique kind of casino, one where you cannot lose in the end, so long as you play only by the rules that put the odds squarely in your favor.”
Benjamin Graham
The Intelligent Investor
Rating
5/5
Conclusion
The writing is fluid and full of details. The author of this book – Benjamin Graham is known as the ‘father of value investing’. His books are considered one of the best books by all top investors, traders and critics.
It is an account of how investors created wealth for themselves. It begins with research and analysis on the financial performance of organizations. They discuss in detail about which stocks to choose based on specific factors, how much to buy in quantity, when to buy, how long to keep and wait for the right time to sell it. They share specific strategies based on various possible scenarios. The author also discusses proven techniques on how investors can make money and avoid losses.
The Intelligent Investor Summary
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About the Author
Benjamin Graham was a British-born American economist, professor and investor. He is widely known as the “father of value investing”, and wrote two of the founding texts in neoclassical investing: Security Analysis, and The Intelligent Investor.
