The Bible of Value Investing: Some Notes and Wisdom from Graham and Dodd’s “Security Analysis”

This article highlights some key takeaways from Benjamin Graham and David Dodd’s Security Analysis.

The future is inherently uncertain, therefore we must have an adequate margin of safety. (e.g. recession, covid lockdowns, black swan events).

Four factors to look for when picking securities:

1. The general future for corporate profits. Macro changes will affect future profit trajectory, e.g. consumers moving from railroads to automobiles, and its effect on railroad earnings
2. The differential in quality between a company and another
3. Influence of interest rates on dividend or earnings return
4. Timing and margin of safety. But since timing never works, we must resolve to the adequate margin of safety.

We can attain a satisfactory margin of safety by purchasing at a price lower than the book value (or possibly even the cash-debt threshold).

Read through competitors’ reports, and understand them.

Understand the industry. We can anticipate a company’s information by examining its competitors since there is usually more data available on them than the company…