THE INTELLIGENT INVESTOR BY BENJAMIN GRAHAM

’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’’