Security Analysis (book)
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| Author | Benjamin Graham and David Dodd |
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| Country | United States |
| Language | English |
| Subject | Finance, Investing |
| Publisher | Whittlesey House, McGraw-Hill Book Co. |
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Publication date
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1934 |
| Pages | 725 |
| ISBN | (2005 edition) |
| OCLC | 2140220 |
| 332.63/2042/0973 22 | |
| LC Class | HG4521 .G67 1934 |
Security Analysis is a book written by professors Benjamin Graham and David Dodd of Columbia Business School, which laid the intellectual foundation for what would later be called value investing. The first edition was published in 1934, shortly after the Wall Street crash and start of the Great Depression. Among other terms, Graham and Dodd coined the term margin of safety in Security Analysis.
Security Analysis was published by McGraw-Hill, and written by David Dodd and Benjamin Graham in the early 1930s, when both authors taught at Columbia University's business school. Writes The New York Times, "it was intended as a common-sense guide for investors but turned out to be a thick textbook that went through five editions and sold more than 250,000 copies [by 1988]." Economist Irving Kahn was one of Graham's teaching assistants at Columbia University in the 1930s, and made research contributions to Graham's texts for Security Analysis.
The work was first published in 1934, following unprecedented losses on Wall Street. In summing up lessons learned, Graham and Dodd scolded Wall Street for its focus on a company's reported earnings per share, and were particularly harsh on the favored "earnings trends." They encouraged investors to take an entirely different approach by gauging the rough value of the operating business that lay behind the security. Graham and Dodd enumerated multiple actual examples of the market's tendency to irrationally under-value certain out-of-favor securities. They saw this tendency as an opportunity for the savvy.
In Security Analysis, Graham proposed a clear definition of investment that was distinguished from what he deemed speculation. It read, "An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."
A number of financial terms were coined in the book. For example, Graham and Dodd coined the term margin of safety in Security Analysis. It is not known when the Period of financial distress phrase was first used or by whom. However, it or phrases closely equivalent were almost certainly first used in connection with the theory of value investing as developed initially by Graham in Security Analysis in 1934.
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