’BY FAR THE BEST BOOK OF INVESTING EVER WRITTEN’’ WARREN BUFFETT CEO& CHAIRMAN BERKSHIRE HATHAWAY INC
The
book was first time published in 1949 by
Ben Graham and revised later by Jason Zweig.
Ben Graham was born in 9 May 1894 was economic profess at Columbia
Business School.
If it ‘s a
person who contributed most to Warren Buffet development it’s with no doubt Ben
Graham which was his professor and
mentor.Intelligent Investor is for Warren Buffett the book that has changed his
investment philosophy and his life forever.Buffett later explained’’ I’m 85 %
Ben Graham and 15% Philip Fisher.
Can we call
this book a definitive guide on value investing.’’Value investing is an
investment strategy that stocks are
selected and trade for less their intrinsic value’’
From the beginning this book wont tell you how to become rich over night but will tell you how to minimize the odds of suffering irreversible losses
INVESTOR VS SPECULATOR
For many
trading is associated with investment which is completely wrong .Simple fact
that someone looks to some charts hoping
that price will go up or down it’s not investing.Here we can add overtrading buying or selling sotcks frequently won’t help you to accumulate
wealth.In Ben Graham view:’’An investment
operation is which,upon thorough analysis promises safety of principal and
adequate return.Operations not meeting these requirements are speculative.’’
COMMON STOCK ANALYSIS
1) General Long Term Prospects
2) Management
3) Financial Strenghts
4) Dividend Record
5) Current dividend rate
GRAHAM NET WORKING CAPITAL TEST
Stocks which are selling for less than net
working capital
CURRENT ASSETS-TOTAL
LIABILITIES+PREFERRED STOKS+LONG TERM DEBT
GRAHAM STOCK SELECTION FOR DEFENSIVE INVESTOR
1) Adequate size of the enterprise
2 2) Sufficiently Strong financial record
(Company current assets should be at least twice current liabilities,also long
term debt not exceed the net current assets)
3 3) Earnings stability
44) Dividend record uninterrupted payments
for the past 20 years
5 5) Earnings
growth
6) 1) Moderate Price/Earnings Ratio (Current price should not be more than 15
times average earnings)
Price Earnings Ratio =Share Price/Earnings per share
P/E below 10 is
considered low
P/E between 10 and 20 is considered moderate
P/E > 20 expensive
7) Moderate Ratio of prices to
Assets Ratio of Price book
Book Vaue* P/E 1,5*15
``22,5 Not exceed 22,5
BOOK VALUE=TOTAL ASSETS-INTANGIBLE ASSETS-LIABILITIES
According to Graham a defensive
investor is a person which is chiefly interested in safety plus freedom .
GRAHAM STOCK SELECTION FOR
ENTERPRISE INVESTOR
1) Financial condition (Current Assets
at least 1 ½ times current liabilities,debt no more than 110% NET Current Assets
2) Earnings stability no deficit in the
last 5 years
3) Dividend record
4) Earnings growth
5) Price Less 120 % net tangible asstes
In
conclusion I recommend to all to read ‘’The Intelligent Investor’’ and don’t forget
what Graham said: In the short run the
market is a voting machine,but in the long run is a weighing machine’’
