The Intelligent Investor_ The Definitive Book on Value Investing - Benjamin Graham [288]
† Mutual funds bought “letter stock” in private transactions, then immediately revalued these shares at a higher public price (see Graham’s definition on p. 579). That enabled these “go-go” funds to report unsustainably high returns in the mid-1960s. The U.S. Securities and Exchange Commission cracked down on this abuse in 1969, and it is no longer a concern for fund investors. Stock-option warrants are explained in Chapter 16.
* The Penn Central Transportation Co., then the biggest railroad in the United States, sought bankruptcy protection on June 21, 1970—shocking investors, who had never expected such a giant company to go under (see. 423). Among the companies with “excessive” debt Graham had in mind were Ling-Temco-Vought and National General Corp. (see pp. 425 and 463). The “problem of solvency” on Wall Street emerged between 1968 and 1971, when several prestigious brokerages suddenly went bust.
* See Chapter 2. As of the beginning of 2003, U.S. Treasury bonds maturing in 10 years yielded 3.8%, while stocks (as measured by the Dow Jones Industrial Average) yielded 1.9%. (Note that this relationship is not all that different from the 1964 figures that Graham cites.) The income generated by top-quality bonds has been falling steadily since 1981.
* “Air-transport stocks,” of course, generated as much excitement in the late 1940s and early 1950s as Internet stocks did a half century later. Among the hottest mutual funds of that era were Aeronautical Securities and the Missiles-Rockets-Jets & Automation Fund. They, like the stocks they owned, turned out to be an investing disaster. It is commonly accepted today that the cumulative earnings of the airline industry over its entire history have been negative. The lesson Graham is driving at is not that you should avoid buying airline stocks, but that you should never succumb to the “certainty” that any industry will outperform all others in the future.
* Tangible assets include a company’s physical property (like real estate, factories, equipment, and inventories) as well as its financial balances (such as cash, short-term investments, and accounts receivable). Among the elements not included in tangible assets are brands, copyrights, patents, franchises, goodwill, and trademarks. To see how to calculate tangible-asset value, see footnote † on p. 198.
Table of Contents
Cover
Title Page
Dedication
Epigraph
Contents
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
Chapter 1
Commentary on Chapter 1
Chapter 2
Commentary on Chapter 2
Chapter 3
Commentary on Chapter 3
Chapter 4
Commentary on Chapter 4
Chapter 5
Commentary on Chapter 5
Chapter 6
Commentary on Chapter 6
Chapter 7
Commentary on Chapter 7
Chapter 8
Commentary on Chapter 8
Chapter 9
Commentary on Chapter 9
Chapter 10
Commentary on Chapter 10
Chapter 11
Commentary on Chapter 11
Chapter 12
Commentary on Chapter 12
Chapter 13
Commentary on Chapter 13
Chapter 14
Commentary on Chapter 14
Chapter 15
Commentary on Chapter 15
Chapter 16
Commentary on Chapter 16
Chapter 17
Commentary on Chapter 17
Chapter 18
Commentary on Chapter 18
Chapter 19
Commentary on Chapter 19
Chapter 20
Commentary on Chapter 20
Postscript
Commentary on Postscript
Appendixes
Appendixes 1
Appendixes 2
Appendixes 3
Appendixes 4
Appendixes 5
Appendixes 6
Appendixes 7
Endnotes
Acknowledgments from Jason Zweig
Index
About the Authors
Credits
Copyright
About the Publisher