The Intelligent Investor

The Intelligent Investor by Benjamin Graham, first published in 1949, is a widely acclaimed book on value investing, an investment approach Graham began teaching at Columbia Business School in 1928 and subsequently refined with David Dodd. Famous investor Warren Buffett described it as "by far the best book on investing ever written",^[1] a sentiment echoed by other Graham disciples such as Irving Kahn and Walter Schloss.

The Intelligent Investor   2003 edition, updated by Jason Zweig Author Benjamin Graham Country USA Language English Subject(s) Finance Publication date 1949

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Value Investing

The content of the book Value Investing already exists in its predecessor Security Analysis. Value investing (which differs from the speculative strategies like "momentum trading" or "technical analysis") objects to the economic assumption that the stock market is efficient. Efficient in this context means the market as a whole always know the important information about a company. The consequence of such an assumption is that there can be no wrong valuation of the stocks. The price of a stock always (at least in most cases) reflects the fundamental value of a company.
The idea of value investing is to buy stocks whose price is lower than their true value and then to hold those stocks until their price returns to the true value earning a return on the investment.

Mr. Market

Main article: Mr. Market

Graham's favorite allegory is that of Mr. Market, an obliging fellow who turns up every day at the share holder's door offering to buy or sell his shares at a different price. Often, the price quoted by Mr. Market seems plausible, but sometimes it is ridiculous. The investor is free to either agree with his quoted price and trade with him, or ignore him completely. Mr. Market doesn't mind this, and will be back the following day to quote another price.
The point of this anecdote is that the investor should not regard the whims of Mr. Market as a determining factor in the value of the shares the investor owns. He should profit from market folly rather than participate in it. The investor is advised to concentrate on the real life performance of his companies and receiving dividends, rather than be too concerned with Mr. Market's often irrational behaviour.

Editions

Since the work was published in 1949 Graham revised it several times, most recently in 1971/72. This was published in 1973 as the Fourth Revised Edition ISBN 0-06-015547-7, and it included a Preface and Appendixes by Warren Buffett. Graham died in 1976. Commentaries and new footnotes were added to the fourth edition by Jason Zweig, and this new revision was published in 2003.^[2]

• The Intelligent Investor (Re-issue of the 1949 edition) by Benjamin Graham. Collins, 2005, 269 pages. ISBN 0-06-075261-0.
• The Intelligent Investor (Revised 1973 edition) by Benjamin Graham and Jason Zweig. HarperBusiness Essentials, 2003, 640 pages. ISBN 0-06-055566-1.

Book contents

2003 edition by Benjamin Graham and Jason Zweig

• Preface to the Fourth Edition, by Warren E. Buffett
• A Note About Benjamin Graham, by Jason Zweig
• Introduction: What This Book Expects to Accomplish
• Commentary on the Introduction

1. Investment versus Speculation: Results to Be Expected by the Intelligent Investor
2. The Investor and Inflation
3. A Century of Stock Market History: The Level of Stock Market Prices in Early 1972
4. General Portfolio Policy: The Defensive Investor
5. The Defensive Investor and Common Stocks
6. Portfolio Policy for the Enterprising Investor: Negative Approach
7. Portfolio Policy for the Enterprising Investor: The Positive Side
8. The Investor and Market Fluctuations
9. Investing in Investment Funds
10. The Investor and His Advisers
11. Security Analysis for the Lay Investor: General Approach
12. Things to Consider About Per-Share Earnings
13. A Comparison of Four Listed Companies
14. Stock Selection for the Defensive Investor
15. Stock Selection for the Enterprising Investor
16. Convertible Issues and Warrants
17. Four Extremely Instructive Case Histories
18. A Comparison of Eight Pairs of Companies
19. Shareholders and Managements: Dividend Policy
20. "Margin of Safety" as the Central Concept of Investment

• Postscript
• Commentary on Postscript
• Appendixes

1. The Superinvestors of Graham-and-Doddsville
2. Important Rules Concerning Taxability of Investment Income and Security Transactions (in 1972)
3. The Basics of Investment Taxation (Updated as of 2003)
4. The New Speculation in Common Stocks
5. A Case History: Aetna Maintenance Co.
6. Tax Accounting for NVF's Acquisition of Sharon Steel Shares
7. Technological Companies as Investments

• Endnotes
• Acknowledgments from Jason Zweig
• Index