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† The actor Paul Newman was briefly a major shareholder in Realty Equities Corp. of New York after it bought his movie-production company, Kayos, Inc., in 1969.

* Graham, an avid reader of poetry, is quoting Thomas Gray’s “Elegy Written in a Country Churchyard.”

* Realty Equities was delisted from the American Stock Exchange in September 1973. In 1974, the U.S. Securities and Exchange Commission sued Realty Equities’ accountants for fraud. Realty Equities’ founder, Morris Karp, later pleaded guilty to one count of grand larceny. In 1974–1975, the overindebtedness that Graham criticizes led to a financial crisis among large banks, including Chase Manhattan, that had lent heavily to the most aggressive realty trusts.

† “Heteroclite” is a technical term from classical Greek that Graham uses to mean abnormal or unusual.

* By “volume,” Graham is referring to sales or revenues—the total dollar amount of each company’s business.

† “Asset backing” and book value are synonyms. In Table 18-2, the relationship of price to asset or book value can be seen by dividing the first line (“Price, December 31, 1969”) by “Book value per share.”

† †Graham is citing his research on value stocks, which he discusses in Chapter 15 (see p. 389). Since Graham completed his studies, a vast body of scholarly work has confirmed that value stocks outperform growth stocks over long periods. (Much of the best research in modern finance simply provides independent confirmation of what Graham demonstrated decades ago.) See, for instance, James L. Davis, Eugene F. Fama, and Kenneth R. French, “Characteristics, Covariances, and Average Returns: 1929–1997,” at http://papers.ssrn.com.

* Air Products and Chemicals, Inc., still exists as a publicly-traded stock and is included in the Standard & Poor’s 500-stock index. Air Reduction Co. became a wholly-owned subsidiary of The BOC Group (then known as British Oxygen) in 1978.

† You can determine profitability, as measured by return on sales and return on capital, by referring to the “Ratios” section of Table 18-3. “Net/sales” measures return on sales; “Earnings/book value” measures return on capital.

* American Home Products Co. is now known as Wyeth; the stock is included in the Standard & Poor’s 500-stock index. American Hospital Supply Co. was acquired by Baxter Healthcare Corp. in 1985.

* “Nearly 30 times” is reflected in the entry of 2920% under “Price/book value” in the Ratios section of Table 18-4. Graham would have shaken his head in astonishment during late 1999 and early 2000, when many high-tech companies sold for hundreds of times their asset value (see the commentary on this chapter). Talk about “almost unheard of in the annals of serious stock-market valuations”! H & R Block remains a publicly-traded company, while Blue Bell was taken private in 1984 at $47.50 per share.

* Graham is alerting readers to a form of the “gambler’s fallacy,” in which investors believe that an overvalued stock must drop in price purely because it is overvalued. Just as a coin does not become more likely to turn up heads after landing on tails for nine times in a row, so an overvalued stock (or stock market!) can stay overvalued for a surprisingly long time. That makes short-selling, or betting that stocks will drop, too risky for mere mortals.

† International Harvester was the heir to McCormick Harvesting Machine Co., the manufacturer of the McCormick reaper that helped make the midwestern states the “breadbasket of the world.” But International Harvester fell on hard times in the 1970s and, in 1985, sold its farm-equipment business to Tenneco. After changing its name to Navistar, the remaining company was booted from the Dow in 1991 (although it remains a member of the S & P 500 index). International Flavors & Fragrances, also a constituent of the S & P 500, had a total stock-market value of $3 billion in early 2003, versus $1.6 billion for Navistar.

* For more of Graham’s thoughts on shareholder activism, see the commentary on Chapter 19. In criticizing Harvester for its refusal to maximize shareholder