“[I]nvesting isn’t about beating others at their own game. It’s about controlling yourself at your own game.” -Zweig
The Intelligent Investor: The Definitive Book on Value Investing by Benjamin Graham and commentary by Jason Zweig is a must read for anyone who wants to get into or is interested in value investing. Graham literally wrote the book on it. Furthermore, his protege Warren Buffett went on to perfect the concept and Berkshire Hathaway.
The Intelligent Investor itself is like reading a textbook. It’s pretty dry (and it probably should be) with some funny anecdotes if you are into finance. The book was originally published in 1973 with commentary from Zweig in 2003. There are some really cool case studies from the Great Depression and recession of 1969-1970. What made this book so good was the chapter commentary by Jason Zweig. Zweig’s commentary comes with perspective post early 2000’s recession and dot-com bubble crash. This new commentary was something I was familiar with and could relate better to than Grahams examples.
Here are a few of my key takeaways from Graham:
- Do not speculate! Do your due diligence.
- An enterprising investor is a defensive investor.
- Invest in a company you would be happy to own.
- Invest for the long term, otherwise it’s not really investing.
- A company’s stock fundamentals should used for screening stocks, not what’s trending in the news, internet, or word of mouth.
- Classic value investing uses a P/E Ratio of <15.
- Compare the company’s financials for assets vs liabilities. See if the price to book makes sense.
- Dividends are a great indicator of a companies respect for the investor. They are a great vehicle to generate more wealth and are typically better than stock price gains over time.
- Using more than basic math and algebra for screening stocks becomes speculative.
- Graham acknowledges when he wrote the book that technical analysis and charting could not predict the future but the more it was used over time, by more analysts, that it could become a better investing tool.
Graham, Benjamin and commentary by Zweig, Jason. The Intelligent Investor: The Definitive Book on Value Investing. HarperCollins, 2006.