09 March 2007

Security Analysis. Principles and Technique. Graham, 1934.

Benjamin Graham & David L. Dodd. SECURITY ANALYSIS. PRINCIPLES AND TECHNIQUE. Whittlesey House; McGraw-Hill Book Company, NY 1934.

Current Selling Prices
$19,000+ / £10,000+ Want level 50 - 75 High

Probably the most influential book on investing ever , it has remained in continuous publication since 1934 and is still reverentially quoted by aspiring fund mangers and merchant bankers. It was also a significant influence on the world's most successful investor Warren Buffet, billionaire brother of Jimmy 'Margaritaville' Buffet. Warren's preference was for the revised 1940 edition. Like Seth Klarman's 'Margin of Safety' it's all about 'Value Investing' - all 725 pages of it.

Benjamin Graham (1894 - 1976 / the happy guy in the pic above) was the father of value investing. In 1928, after great financial success on Wall Street, he started teaching Advanced Security Analysis at Columbia- his old college. He had been thinking of writing a book, and he reasoned that the best way to accomplish his goal was to prepare and teach the material in a classroom setting. The notes from the course were transcribed by his student, David Dodd, and formed the basis of this timeless financial classic.

It was the foundation of a whole new approach to the investment industry based on principles that appealed to common sense but were at the same time exceedingly effective. “Understand the difference between price and value” and “always allow for a margin of safety” are two examples. He said of investment firms: '“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculation.” This is not a guy who would have lost his shirt in the dotcom crash.

The first is pretty scarce, there is some doubt whether it ever had a wrapper and it has the appearance of a scientific or engineering text book (maroon cloth lettered gilt at the spine with black blocking around the title at the spine). Text book style books like this can be issued sans d/w. The copy sold on ebay (see below) was in black which, it seems, is an alternative binding of the true first - no one knows, or yet cares, whether the black or the red precede one another.

VALUE? A copy of the true first has been on ebay for 2 months at $40000 I suspect it takes a price like that to totally stop the book from selling. A copy signed by Graham but a second printing is at $50K. I suspect that a 'value investor' would eschew both if he had assimilated Graham's principles (remember price does not equal value) ; a stock trader, especially one flush with a Christmas bonus, might conceivably buy one as a sort of trophy. It is a book that seems to command good sums as a reprint - a 1934 third printing is for sale at north of $7K.

It also a book that attracts alot of underliners. Highlighting and underlining unless it's by someone like John Maynard Keynes or Alan Greenspan is best avoided, especially if the book is to be resold at some point. One guy has a copy with serious underlining to the first 630 pages in blue and red, it's an early edition but at several thousand bucks it is a noli tangere with a bargepole.

The 1940 edition 'firsts thus' are prized and get just over $1000. A word of caution, this is a volatile and trendy market and there are not many reports of actual big sales. A fairly decent true first made $19,999 on ebay in 2005/6 but another heavily ex-lib copy (we're talking perforations) got bought in at a terrestrial auction for $500, after failing against an estimate of $10,000-$15000 last year. 'Bought in' means failed to sell.

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