January 14, 2023

Security Analysis - Chapter 49

Security Analysis by Benjamin Graham and David Dodd was first published in 1934. It is a fundamental book for serious students of value investing.

In Chapter 49, the authors discuss comparative analysis techniques specifically for railroads, public utilities, and industrials.

The comparisons should be done across various items including capitalization and earning records. In comparing the earnings, the time period for calculating average figures should exclude periods of abnormal results, and include the full cycle for the business. The comparison has limitations among companies with conservative and speculative capital structures.

Moreover, qualitative studies should be done before fully accepting the conclusion of the comparative analysis. In addition, the authors warn against drawing conclusions about companies that are heterogeneous. 

Chapters 50 and 51

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