The Intelligent Investor: The Classic Text on Value Investing

What are you waiting for, buy the book and rock your world. I am reminded of the old joke we use to tell in Wall Street when I was with Lehman Brothers back in the 1970's. It's the story about the guy who is given permission to remove as much gold as he can from Fort Knox but he only has a morning, and must work alone. He's given a truck and a wagon to haul the gold with. He gets in the truck and heads the wrong way. "Where are you going, you are going the wrong way, you only have a morning to work with, and the clock has started." His answer is classic, "I am going to get breakfast first."

The point is very simple. People are reading Wall Street Journals, getting MBA's, and watching the talking heads on television. I've got portfolio managers who would kill for an edge, and every one of them, all of them are missing the point. It's all there, all the knowledge, all the wisdom you need to become a MASTER in the financial markets. You simply have to know what to read, and you begin by reading THE INTELLIGENT INVESTOR.

At Harvard we use to say they divided the building up into two lecture halls tonight. The door at the first hall has a sign that says LECTURE ON GOD, on it. The door of the second lecture hall has a sign that says GOD on it. Everybody wanted to go to the lecture. Listen up folks, this book THE INTELLIGENT INVESTOR, it's the real thing. This is not Madison Avenue sitting down with a author that they pulled out of Hollywood, and said let's put some interesting witticisms into a book on investing, dress it up, market it smart, and make a couple of bucks.

This is a book by a man with an Einstein type IQ, whose natural abilities were in the financial arena, who has the uncanny skill sets to explain himself in beautiful prose that just about all the rest of us can understand. If you want to be in the stock market, and you haven't read Benjamin Graham, it's like being in a gunfight in the old west, and not having a gun. You got to do the basics, and very few people do.

Wasn't it Woody Allen who said, "80% of making it is just showing up?" If you want to be in the market, and outperform everybody else wanting the same thing, than you can't do the same things they do, or you will get the same results, and that means mediocrity. You are in the race for Alpha, the extraordinary return. To win the race, you need an EDGE. Now how many people do you think are doing the basics? The answer is about as close to zero as you can get.

Investors, just like people want instant gratification with a minimum of effort, energy, and pain, and that's not how smart, astute investing works. You need to read books like this one not once, but over and over again, until it becomes part of you, until emotionally its wisdom becomes imprinted in your brain. You then need to start implementing it. See what kinds of results you are getting, and then make the adjustments necessary to make its wisdom YOUR OWN.

In other words, you need to OWN THE KNOWLEDGTE THAT'S IN THIS BOOK. Can it be done? Yes, but not easily. Benjamin Graham spent a lifetime figuring this stuff out. He didn't hit the ski slopes at Sun Valley. He wasn't sitting by the pool at Bungalow 5, at the Beverly Hills Hotel. He was grinding out the "Margin of Safety" concept, and testing it against the real world, did it work, and did it falter? Was it a 100 percent reliable.

I have heard Warren Buffett his most famous, but not only successful disciple tell the story of how the students in Graham's class room at Columbia would challenge the old man. Graham would used those challenges to make his thinking better, sharper, more real, and in so doing he became a better investor.

You want to know about Mr. Market, and why just about every investor ignores this theory, which is the equivalent of the Quantum Theory in Physics. You need to read the book. In Chapter 11, he teaches you how to value a business, his way. The teachers at Harvard, Wharton, Ross School, and others have nothing on Ben Graham. We are all students at his feet.

In my lifetime, I have worked with some of the smartest people on the planet. My direct mentor is the richest man on Wall Street, and I have known just about every major national and international investor worth his salt in the world in my generation. Every one of them could quote Benjamin Graham, meanwhile the want-to-bees, were out getting fitted for suits, after having lunch at the 21 Club.

Absorb some wisdom from someone who has been there. Read this book; learn about the "Circle of Competence", and the overwhelming importance of investor psychology. It is amazing that in this book several generations old, Ben is dealing with the same issues confronting us today, director independence, broker conflicts, frequent trading and the lack of performance it creates, management teams out of control, and dealing in a self-serving manner.

Each edition of this book is unique in its own way, with different world-class players commenting along side the text. I happen to like this edition because John Bogle (read his books also) is a man who I respect enormously who has impacted the investing world. The revised edition with Warren Buffett commenting is wonderful also. You simply can not go wrong touching anything that has been written by Benjamin Graham. Good luck.

Richard Stoyeck
[...]

This book is a true classic, and most investors would be well-advised to start with this book as they seek to learn more about the process of making their money work for them. In particular, Graham's book is useful because it recognizes that the universe of potential investments is greater than just stocks - he covers warrants, bonds, etc.

Graham's main point is that investors look at the fundemantals that underly a potential investment to determine the probability of a satisfactory outcome. Hence, Graham does not focus on macroeconomic factors, but instead, he determines the "intrinsic value" for any investment, hopefully buying well below that value, a concept he calls the "margin of safety."

As some reviewers have noted, this book has been criticized by some thinkers as being out of date. In particular, most readers should understand that one of the theories that underlies Graham's philosophy, that a stock is worth the aggregate value of its expected dividends (See John Burr Williams' "Theory of Investment Value"), has been modified somewhat by "discounted cash flow" theories. This means that to some investors, p/e ratios and dividend payouts are de-emphasized somewhat. To me, this does not mean that Graham's theories lose validity, particularly as concerns the notions of intrinsic value and the margin of safety.

As far as I am concerned, Graham's book is most useful when viewed as a theory about how to invest. As such, it is a valuable guide, particularly when read in conjunction with Phil Fisher's book "Common Stocks and Uncommon Profits" and Marty Whitman and Marty Shubik's book "The Aggressive Conservative Investor." Another book that readers of the Intelligent Investor might like would be Dreman's "Contrarian Investing: the Next Generation."

A quick warning to prospective readers: at the outset, reading anything by Graham can be somewhat slow going. I received a copy of this book as a gift years ago, and could not slog through more than 1/2 of it. It was only years later, after learning more about investing and accounting, that I truly came to appreciate the wisdom contained in this book.

Readers who appreciate The Intelligent Investor might also want to try "Security Analysis," which develops the ideas in the Intelligent Investor in much greater detail, and also sets forth more criteria about how to analyze investments (the chapters on financial statements are particularly useful). I have reviewed that book (3rd edition) as well, if anyone is interested.

Although it takes some work to make it through this book, one point that readers should understand is Graham firmly believes that it takes work to invest wisely. He would never encourage investing on tips, momentum investing, etc. A reader would be well-served to apply himself or herself to investing research with the same diligence that reading this book requires, and I don't doubt they will be rewarded as a result.

Out of all the editions of this book commonly available I have to admit liking this one the best. It is the original Graham unfiltered by Warren Buffett or anyone else. There is some great advice in the book but much of it is available elsewhere these days and much of it many experienced investors understand only too well after recent adventures in the stock market. It is worth noting, however, that despite all the hype about Graham's being a buy and hold kind of guy, the book contains a Dow Jones timing strategy that the author thought the public might find useful in timing their sales and purchases of stocks.

Anyhow, those wanting to hear this advice from the horse's mouth will enjoy this book better than the other editions.

Quality control was obviously lacking when printing this book. The page edges are not even which makes it difficult to turn the pages easily. Take a look at the picture I’ve attached to see it for yourself.

I paid for hard cover edition and quality was very poor. Pages were not even cut properly and were completely misaligned on its right end

It gets the Warren Buffett seal of approval, therefore everyone who reads it is going to clamor over how good it is. But let's think for a moment. If you begin investing using Graham's "net net" methodology, you are going to lag the market. I have read this book before. I am re-reading it. This is one of the first books I read about the stock market, for the same reason everyone else does, because the rich man recommends it. Let's look at what Graham preaches though. He spends the first part of the book going over 70-100 years of stock price history, when a MUCH BETTER analysis exists in "Stocks for the Long Run" by Jeremy Siegel. He says to buy stocks trading below their net tangible assets and book value. America and business has changed!!! Contract manufacturing and outsourcing did not exist nearly to the degree they did in 1970! Graham mentions that AT&T traded at below it's tangible assets in 1970, which was not a period of cheap stock prices. Today it trades at roughly 2x book value, let alone tangible book value. It trades at 10x earnings. Meaning you will have to wait until T trades below 5x EPS to buy it. Today's businesses are doing more with less. Why does Graham recommend this? Because if you buy stocks of companies trading below tangible assets, you will be less swayed by the market swings. How about working on your temperament so you are not so easily swayed by "Mr. Market?" A better book on psychology has also been written since 1970: "Inside the Investor's Brain." I have read a LOT of books on the stock market between when I started and now, including many on psychology of investing. I'd much rather mentally train myself rather than buying stocks of garbage companies that are more likely to go nowhere or down.

Aside from "Stocks for the Long Run" and "Inside the Investor's Brain," I suggest "Value Investing; From Graham to Buffett and Beyond." It is a more modern version of this book.

This book also spends a lot of time discussing bonds. I do not invest in bonds and don't plan to for several decades. Graham's suggestion is to not invest in foreign bonds because you have no legal recourse if they default. How about buying a diversified international bond fund? I'm sure they exist! I know I performed sacrilege by not praising one of Buffett's favorite books, but I think this will be a little more beneficial to people, especially those starting.

This is NOT the revised edition with commentary by Zweig as the description currently states. It is the original edition from 1949, before Warren Buffet and Ben Grahm revised it in the seventies, and before Zweig's edition.

When international award winners (Nobel laureates, Pulitzer Prize winners) are asked how they came to such remarkable achievements they usually make references to standing on the shoulders of giants. In essence, they pay tribute to the trailblazing giants who mentored their progress. Consequently, if you're trying to gain a clearer understanding of their genius simply read the works they read.

For instance, for a better understanding of politicians and what we commonly refer to as their unscrupulous behavior, read The Prince, by Niccolò Machiavelli. For a better understanding of classic capitalism and the foundational attitude of the wealthy, study An Inquiry into the Wealth of Nations, by Adam Smith. To gain a comprehensive understanding of Adam Smith the man, you have to read The Wealth of Nations in conjunction with his other famous work, The Theory of Moral Sentiment. For a clearer understanding of man's quest for validation here on earth read Viktor Frankl's, Man's Search for Meaning.

All of these people and their works are accepted as the pinnacle of greatness in their fields. If you were to add to that list, The Intelligent Investor, by Ben Graham, you may very well have found a blue print for the successful manipulation of life. According to Warren Buffet, "The Intelligent Investor is by far the best book on investing ever written."
If the world were to recruit one of its greatest investors to instruct the rest of us in balanced, diversified portfolio management, we'd start with Ben Graham. For those interested in exploring wealth creation and personal portfolio management, there is absolutely no better financial or philosophical starting point.

Even if you don't plan on managing your own portfolio, wouldn't it be nice to know what questions to ask? Do yourself a favor and buy this book. Read it, learn it and love it because once you've learned the text you'll never be the same.

This book has serious manufacturing defects. First books pages were not in align, same problem with replacement book. Amazon must have no quality control, because I do not known how they could miss this. Amazon was great in replacing book, but sent me another defective book. Had no other problems with Amazon books in past. If you order this book expect defects.

During the last five years I entered the stock market and took a couple of seminars on investing in stocks, the seminars were valuable introductions to the market, after reading the book I discovered that what I had learned in those seminars was to behave like an speculator rather than a true investor. After many costly mistakes I know why I needed to read the book. The cases presented in the book of companies that in many cases no longer exist do not harm the wisdom and clarity of the basics needed to become a true investor. I recommend the book to every person who wants to enter the market. It is actually a must read beforehand. Now I know what Warren Buffet means when stating "this is the best book on investing ever written". Hope you will find it as valuable.

Carlos Irving Rojas - Mexico City