Benjamin Graham - Security Analysis: The Classic 1940 Edition: The Classic 1940 Edition

SECURITY ANALYSIS

The quality of the materials used in
the manufacture of this book is governed
by continued postwar shortages.

Many shall be restored that now are fallen and many
Shall fall that now are in honor.

HORACEArs Poetica.

Principles and Technique

BY

BENJAMIN GRAHAM

Investment Fund Manager; Lecturer in
Finance, Columbia University

AND

DAVID L. DODD

Associate Professor of Finance
Columbia University

SECOND EDITION

Copyright 1934 by The McGraw-Hill Companies, Inc. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

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The first edition of Security Analysis, published
in 1934, forever changed the theory and practice of successful
investing. Yet the remainder of that tumultuous decade brought
unprecedented upheaval to the financial world. In 1940, Benjamin
Graham and David Dodd were compelled to produce a comprehensively
revised second edition. For that reason, Security Analysis, Second
Edition, is considered by many investors to be vastly superior
to the first and the final word from one of the most influential
investment philosophers of our time.

Security Analysis, now in its fifth edition, is regarded around the
world as the fundamental text for the analysis of stocks and bonds,
as well as the bible of value investing. To commemorate the books
great achievement, and to reintroduce to readers the ideas and
language of the celebrated second edition, McGraw-Hill is
proud to publish this special reproduction
of the 1940 edition.

This special reprint edition was photographed by hand from the
original pages of the second edition by Jays Publishers Services,
Inc., Rockland, Massachusetts. A customized vertical camera,
designed to minimize distortion and to prevent damage to
rare books, was used. This edition was printed and bound
by R.R Donnelley, Crawfordsville, Indiana.

To

ROSWELL C. McCREA

The lapse of six years since first publication of this work supplies the excuse, if not the necessity, for the present comprehensive revision. Things happen too fast in the economic world to permit authors to rest comfortably for long. The impact of a major war adds special point to our problem. To the extent that we deal with investment policy we can at best merely hint at the wars significance for the future. As for security analysis proper, the new uncertainties may complicate its subject matter, but they should not alter its foundations or its methods.

We have revised our text with a number of objectives in view. There are weaknesses to be corrected and some new judgments to be substituted. Recent developments in the financial sphere are to be taken into account, particularly the effects of regulation by the Securities and Exchange Commission. The persistence of low interest rates justifies a fresh approach to that subject; on the other hand the reaffirmance of Wall Streets primary reliance on trend impels us to a wider, though not essentially different, critique of this modern philosophy of investment.

Although too great insistence on up-to-date examples may prove something of a boomerang, as the years pass swiftly, we have used such new illustrations as would occur to authors writing in 1939-1940. But we have felt also that many of the old examples, which challenged the future when first suggested, may now possess some utility as verifiers of the proposed techniques. Thus we have borrowed one of our own ideas and have ventured to view the sequel to all our germane 1934 examples as a laboratory test of practical security analysis. Reference to each such case, in the text or in notes, may enable the reader to apply certain tests of his own to the pretensions of the securities analyst.

The increased size of the book results partly from a larger number of examples, partly from the addition of clarifying material at many points and perhaps mainly from an expanded treatment of railroad analysis and the addition of much new statistical material bearing on the exhibits of all the industrial companies listed on the New York Stock Exchange. The general arrangement of the work has been retained, although a few who use it as a text have suggested otherwise. We trust, however, that the order of the chapters can be revised in the reading, without too much difficulty, to convenience those who prefer to start, say, with the theory and practice of common-stock analysis.