benjamin graham intelligent investor pdf

Intelligent Investor: Chapter 18

December 1, 2020 by Laxman Sonale 1 Comment

Hello friends, in today’s article we see chapter 18 of the intelligent investor, which is on A comparison of eight pairs of companies. In this chapter 18 author give the different types of companies, and which one we have to choose. so let’s see chapter 18 of the intelligent investors.

A comparison of Eight pairs of companies:-Intelligent Investor: Chapter 18

Benjamin gram gives us eight pairs of companies and also explains which one is good and bad. so let’s see the pairs of companies as follows.

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About the pairs:

REIT and REOC: These are two companies, in this REIT is a good stable company and provides the maximum dividend. In REOC companies, they take the dept and don’t give the maximum dividend. Remain with his dept they buy the asset capital which appreciates in the future. In the long term, REIT is a good performance as compared to the REOC. (Intelligent Investor: Chapter 18)
Value Stocks vs Growth Stocks: One is value stocks and the other is the growth stocks. In a short period, the value stocks perform poorly, and growth stocks perform well. But value stocks outperform in the long term as compare to growth stocks.
Bothe overvalued: Both companies are overvalued. One is more overvalued than the other companies.
One overvalued: One company is overvalued, but still went 35% up from that level. So the author gives us advice, is don’t short sell, like these companies. Because we don’t know how much time these companies stay overvalued.
One company successful but highly overpriced other companies cheap but poor fundamental: Both companies are not good investments. (Intelligent Investor: Chapter 18)
One was a publication: In this period this companies IPO is overvalued and which stocks fell later and other companies have a reasonable investment. in that other companies perform well in the long term.
One was a conglomerate: In conglomerate companies, these companies buy the shit loads or shitty modes of financing. After a few years, these companies sell some shit loads because they not perform well, so don’t buy like these companies. Another company is a diversified portfolio, and this company does well in the long term.
One didn’t pay dividends in 13 years and had acquired 24 companies: This type of company is not good for the investment, because these companies not have the focus vision with his companies. so stay away from it.

so this is all eight pairs, with that, the author gives some advice, they are as follows

Some takeaways:

sometimes there are good cause and bad cause of the company.
In the stock market, there are no such things as good stocks.
There are only good stocks price which come and go.
For example, one company discovered that rear cancer recovery drugs. Another company is a garbage company. (Intelligent Investor: Chapter 18)
In these companies, people think the rear cancer discovery drug company does well, but actually, they found the very less customer to treat whatever the treatment price as compare to the garbage company. So the author said, ” In the short-run, a market is a voting machine but in the long run it’s a weighing machine.”

So there is all about chapter 18 of intelligent investors.

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Intelligent Investor: Chapter 17

November 30, 2020 by Laxman Sonale 4 Comments

hello friends, in today’s article we see chapter 17 of the intelligent investor book. In this chapter 17 benjamin gram give four extremely instructive case studies of the company. so let’s see chapter 17 of the intelligent investors in detail.

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Four Extremely Instructive Case Studies:-Intelligent Investor: Chapter 17

Benjamin gram gives the four company case study which can help you to identify good stocks. let’s see

Company one: This company is a big joint, and well in trends, and everyone is attracted to this company. Everyone thinks they get a good return from it and that why its company goes overpriced. So the author gives the advice to stay away from it.
Company second: This company is taking the debt to acquire the other company. so check for the companies financial statement. and this type of company is a big joint but they taking dept. So stay away from it.
Company third: This company is also taking the dept to beat the big company which has a competitive advantage, so stay away from it.
Company four: This company is starting phase and start with its IPO and they get the overprice for their promises. They don’t have any experience but people start buying company shares by believing in the company’s promises. So stay away from this company also. (Intelligent Investor: Chapter 17)

so moral of the story as follows

Moral of the story:

Do the elementary job of going through annual reports extensively.
people are speculative, so don’t go with him, because they don’t do any analysis and if sometimes yes then they only look at an overview of financial statements.
Do research like compare each other between company.

so doing any investment do whole research like buying any refrigerator for your home.

This is all about chapter 17 of the intelligent investor book.

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value investor

Intelligent Investor: Chapter 16

November 30, 2020 by Laxman Sonale 3 Comments

Hello friends, today’s article is in chapter 16 of the intelligent investor book. in chapter 16, we see the convertible issues and warrants, and how they benefited investors, this all information provided in chapter 16 of the intelligent Investor book.

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Convertible Issues and Warrants: Intelligent Investor: Chapter 16

Convertible issues and warrants are types of financial instruments. These instruments sold by the company to investors for increasing funds.

Convertible Issues: This is a type of bond which have the facility to convert the bond into a share. These convertible issues helpful when you buy the bonds of the company. This bond can be converted into stocks when the stock price increases. This is one benefit of convertible issues. But, there is one thought remain. If you know the stock price is increasing. why should you buy, these convertible issues? This convertible issue gives you a consistent minimum interest. And also has a high price for convertible issues. (Intelligent Investor: Chapter 16)
Warrants: Warrants are a type of stock option, so Benjamin gram criticizes the convertible issues and warrants.

If the company has maximum warrants then you should stay away from that company. This type of company takes advantage of investor money for stupid financial instruments. If you invest in any company, then you have to decide which one you should buy is stocks or bonds. If you want the minimum return, then buy the bonds and if you want the maximum return then buy the stocks. This all decides on the company analysis, in this analysis you should read the notes of the company and financial statements.

Benjamin gram said,” Convertible issues and warrants are the worst of worlds” and other things are that if you want to invest then diversify your portfolio in the Cash, straight bonds, Domestics stocks, and foreign stocks.

So the salesman of convertible issues and warrants say,” this is the best in the world”. Because they have the big commission on that instrument so be an intelligent investor by staying away from this type of investment.

This is all about chapter 16 Convertible issues and warrants in The intelligent investor book.

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Intelligent Investor: Chapter 15

November 29, 2020 by Laxman Sonale 2 Comments

Hello friend, in today’s article we see chapter 15 of the intelligent investor book. In this chapter, benjamin gram discusses the enterprising investor criteria. These criteria help you to become an enterprising investor in-stock selection. Let’s see chapter 15 of the intelligent investor book.

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6 Criteria for the stock selection:-Intelligent Investor: Chapter 15

Strong financial condition: Each and every investor those are a defensive investor or an enterprising investor both see the strong financial condition of the company. This condition helps you to boost your confidence about the investment, so check for the strong financial condition. (Intelligent Investor: Chapter 15)
Earning Stability: Enterprising investors also check the earning stability and this earning increase by 5 % in the positive way. For this purpose, you can consider the previous year’s earnings.
Dividend Record: Great investor of all time is warren buffet say’s, ” Your investment principle get from the dividend, and this dividend you can invest in other company. all your investment money comes in the dividend form, so check for the dividend record. “
Earnings Growth: with a dividend record enterprising investors also check for the earning per share i.e. earning growth. This EPS is increased by 4% in these years as compared to the previous year.
Moderate P/E ratio: You can also for the price earning ratio. this ratio is not more than 15. If your price earning ratio is more than 15 so don’t buy that company stocks. This type of company takes money from the investor for the trading event. this type of event can be changed every time. (Intelligent Investor: Chapter 15)
Moderate P/B ratio: enterprising investors also check for the price-book ratio. this ratio is not more than 1.5. and also make calculations in between the p/e ratio and p/b ratio it’s multiple is not more than 22.5.

we see the 6 criteria for stock selection for the enterprising investor, with this author give us some other things that every enterprising investor consider.

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Other things to consider:

Net-Net result: enterprising investors see the net-net result that means current asset – current liability. making this calculation you get the exact condition of the company.
Special situations: enterprising investors check for the company’s special situations like acquire the company, novel discovery, etc. (Intelligent Investor: Chapter 15)
Selecting individual stocks is not necessary: If you are very busy in your work so you can hire a broker for your Investment.
Use virtual money to picks stocks: If you are a beginner in the stock market. Benjamin gram recommends you to practice for one year with the virtual money to picks stocks. After this, you can use your real money for the investment. (Intelligent Investor: Chapter 15)
Index funds: author give the most advice is the buy the index funds with minimum charges and invest in each and every month.

after this author gives us the two traits of an enterprising investor, those are as follows:

Disciplined and consistent: Don’t change your approach even if it is unfashionable regarding stock selection.
Pay little attention to what the market is doing: an enterprising investor has to focus on what they need to do and how to do it. (Intelligent Investor: Chapter 15)

this is all about the enterprising investor traits and criteria

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Intelligent Investor: Chapter 14

November 25, 2020 by Laxman Sonale 2 Comments

Hello friends, I am Laxman. In today’s article, we see Chapter 14 of the intelligent investor book. In chapter 14, Benjamin gram explains the Defensive investor’s criteria. These criteria help you to pick good return stocks for defensive investors. Chapter 14 of the intelligent investor give some idea for a defensive investor. Those don’t want to give full time for the research analysis. Those criteria as follow.

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7 Criteria for stock Selection:

Adequate Size of Company: Defensive investors have to consider the large size of the company for their money safety. Investing rule no.1 is that Never lose money. If you don’t make money it’s ok but doesn’t lose money. So, for this reason, select the adequate size of the company.
Strong Financial Condition: Sticking with the first rule of investing, you have to select a strong financial condition company. ( Intelligent investor: Chapter 14)
Earning Stability: Defensive investors have to check for the earning stability with continuous five to 10 years, and also check if it goes negative in any year.
Dividend Record: If you are a defensive investor, that means you have to check the dividend record If the company gives the regular dividend and gives slow growth in the dividend.
Earnings Growth: Defensive investor also checks for the earnings growth, which increases 3% in 10 years and 33% in the previous year.
Moderate P/E ratio: Defensive investors also check for the Price earning ratio. This ratio is about less than 15. This ratio, not more than 15. (Intelligent investor: Chapter 14)
Moderate P/B ratio: Defensive investors also check the P/B ratio. This ratio is not more than 1.5.

You have to consider the P/E and P/B multiple is not more than 22. if you consider the above criteria, you will be a good defensive investor. Defensive investors are those that not have enough time to research and not understand the proper accounting. Benjamin gram refer the investors which don’t have time to become enterprising investor, they have to select the longs terms index funds, that have minimum charges. you want to research for the company as a defensive investor you have to consider the above criteria. So benjamin gram gives some due diligence for the defensive investors, they are as follows.

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Due Diligence:- Intelligent investor: Chapter 14

Do your homework: If you want to select stocks on your analysis, you have to read the 5 years annual reports, quarterly reports, and proxy statements. After this, you have more knowledge about the company.
Check out your neighborhood: As a defensive investor, you have to check any investment of institutions investors, that more than the 60%. If the answer is yes then don’t invest in that company. Because when these institutions investors, make a profit they will sell the stocks then stocks price goes down. so for this reason, ownership of institutional investors is not good for individual investors.

This is all about Chapter 14 of intelligent investors.

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Intelligent Investor: Chapter 13

November 20, 2020 by Laxman Sonale 1 Comment

Hello friends, in today’s article, we see chapter 13 of the intelligent investor book. Chapter 13 of the intelligent investor, discuss the four listed companies, see them one by one.

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Comparison of Four Listed companies:-Intelligent Investor: Chapter 13

Benjamin gram gives us the four companies example to select the good stocks of the company. In these companies, the first and second are the most popular and famous ones. And remaining are the unpopular as well as strong fundamental.

The first and second number of companies is the high price. The third and fourth are the very cheap cause of unpopular.

If you have decided which company we have to choose to get the good stocks. Most of the people take the popular but they don’t think about the fundamentals of the company. (Intelligent Investor: Chapter 13)

You can not buy a company because this is famous, but most people do that. The intelligent investor chooses the company which has the fundamental strength and takes the margin of safety.

The intelligent investor goes against the cloud for the good cause with this satisfying reason.

for this purpose others give us some takeaways, they are as follows.

Some takeaways:-

To high P/E ratio are never justifiable: If some companies are famous, most of the time they have to highest P/E ratio but for the Intelligent investor this is not justifiable.
Prefer value type- investments over glamour type investment: If you want to become an intelligent investor you have to prefer value type investment over glamour type investment. In value type investment you focus on the value of the company and its stocks. and in Glamour type investment include the famous company with people opinion and those company only depends on the crowd.
Don’t pay too much for future prospects in Advance: If you want to be an intelligent investor, so pay price for the past and present performance and not pay for the future. Because the future is not in our hands, most people pay too much for the future. So the intelligent investor is careful.

This is all about chapter 13 of the intelligent investor book

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psychology of investing by a value investor

Intelligent Investor: Chapter 12

November 13, 2020 by Laxman Sonale 1 Comment

Hello, friends, in today’s article, we see Chapter 12 of the intelligent investor book. In this chapter, the author explains the things to consider about per-share earnings. Chapter 12 of the intelligent investor book gives us the right path to consider the EPS. let’s see

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Things to consider about the per share Earnings:-Intelligent Investor: Chapter 12

The author explains to us that we do not consider the EPS price on the balance sheet. so to consider the right way is are following. let’s see one by one

Reported Earnings Problem:- Intelligent Investor: Chapter 12

Ignore Pro-forma financial statements: First of all, ignore the financial statement about the EPS because behind that we don’t know the reason.
Consider the effect of dilution by stock options: you have to consider what happens when stock is diluted on EPS.
Unrealistic assumption of return on Pension Funds: If the company assumes some profit from the pension funds, then it’s the cause of concern for the investor. Because these pension funds do not stay for a longer time. (Intelligent Investor: Chapter 12)
Special hiding liabilities of the balance sheet: you have to check the purpose of doing this activity.
Capitalizing expenses as assets: You have to check to capitalize expense, and if the company considers this is an asset for the company. It’s is cause for concern.
Provision to carry-forward tax: If you check the provision to carry forward tax, and get the is there some way, then it’s maybe helpful to the company. and also check for the 10 to 20 years of provision of tax.

above-mentioned points that is come in the problem when we check for the EPS and the author gives us some normalized EPS.

Calculate an average of 7 to 10 years of earnings, or over the span of the business cycle. Then divide by Share of outstanding to get normalized EPS. (Intelligent Investor: Chapter 12)

If you want to become an enterprising investor, you have to do an effect on understanding the financial report and check the right reason for writing this. and also check for the purpose behind that. For this reason in this book Three books are referred to learn more about the financial statements, with some tips, let’s see one by one

Some tips:

you can read the annual report backward
You can read the notes to financial statements
Read more to increase your knowledge

- Financial statements analysis- Martin fridson and fermards
- The Financial numbers Game- Charles Mulford and Eugene
- Financial shenanigans- Howord shilit
- Interpretation of financial statement- author( Benjamin gram)

Follow these steps to get a good company EPS. Learn more about accounting, because warren buffet says ” Accounting is the language of business, those speak well do better business.”

This is all about Chapter 12 of the intelligent investor book.

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How to become a value investor

Intelligent Investor: Chapter 11

November 12, 2020 by Laxman Sonale 2 Comments

Hello friends, in today’s article we discuss the Security analysis for Lay(common) Investors i.e chapter 11 of the intelligent investor. In chapter 11 of the intelligent investor, Benjamin gram gives us the Four elements to consider for buying stocks. That element as follows

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4 Element to make decisions:-Intelligent Investor: Chapter 11

Company’s general long term prospects
Quality of its Management
Financial strength and Capital strength
Dividend Record

let’s see one by one

Companys general long term prospects:- Intelligent investor: chapter 11

to know about the company you have to ask two sentence

How did the company grow?
Where to come profit?

and also check the company’s acquisition and also OPM(other people’s money). If a company depends on other people’s money and they acquire other companies. This type of company does not grow well in the future, and If it depends on other people’s money, they are taking the debt on the company. Also, check the customer range of the company. if the customer is less or minimum then don’t buy the company. (Intelligent Investor: Chapter 11)

If the customer is more and maximum, then that is a good sign. Also check the good competitive advantage like coca-cola, Gillet, etc. Check the net income of the company and revenue with constant earning increases over the past 10 years. 10% is good constant earning before tax and after 7% is good.

If a company invests in Research and Development, for the future product that is a good sign for the company. Most important if the cash flow operating is negative consistently and cash flow of financing activity consistently positive then leave the company. Because this type of company taking the debt on the company. (Intelligent Investor: Chapter 11)

Quality of its management:

Management is the core of any company, so you have checked the management.

Management should be honest and complete the promises of investors and customers. you can see the company record of management and his promises, and also they are accepting the mistake and take the responsibility to handle it. And also check the stock issues, If the stock goes higher and goes down quickly is a bad sign, management has to maintain the P/E ratio. That ratio is not more than 16. (Intelligent Investor: Chapter 11)

Financial strength and capital strength:

each and every company requires finance, so you have to check finance also. for this you can do this.

You can check the Owner earning, this may be 6-7% increases consistently. also, check the Debt to equity ratio, this ratio is 1 not more than that. And you have to include in-dept called as preferred stocks. and also check the Interest coverage ratio, this may be 4 is a good sign. (Intelligent Investor: Chapter 11)

Dividend Record:

If you want to make an investment, in the long term by using compound interest. Then you have to check the dividend record. If the company has the computation record then you check the company outperformance from the computation. If this is not happening then the company wastes the investor cash, this type of company has to give the dividend. (Intelligent Investor: Chapter 11)

You have to check if the company doing the publicity of the stock split, then this type of company fools the investor and wastes the money of the investor. if the company buys back the share is a good sign of the company when they are cheap. if a company buys shares at is a higher price then they waste the money. Check for the dilute diluting if this happens stop this.

If you check these 4 elements of security analysis. you get good company,

This is all about the Security analysis for common( lay ) investors.

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Intelligent Investor: Chapter 10

November 11, 2020 by Laxman Sonale 1 Comment

Hello friends, In this article, we discuss chapter 10 of the intelligent investor book. In this chapter, the author explains the relation between The investor and his Advisors. So let’s see chapter 10 of the intelligent investors.

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Investor & his advisor:-intelligent investor: Chapter 10

In this chapter, when investors want to invest in the investment funds, they have to ask the same question for their safety of principle. This question asked by the investor to the Advisor. so they will as follows

The question asks to Advisor:

Do you use technical analysis or market timings? If the answer is yes, then you have to leave this office as quick as and find the other investment funds. The reason behind this is the only that, if they use the technical analysis they are not focusing on the company. They only want to make money quickly by using our money. So we know that in short term market is the voting machine and in the longs term the market is the weighing machine. For this reason, you have to leave the office. If the answer is no then as the following questions. (intelligent investor: Chapter 10))
What do you do when an investment does poorly? If the answer is to sell, then you don’t buy from investment funds. If the answer is we check the investment balance sheet and get the right answer why they do poorly. Then you can buy it from him.
How many fees? This is an important question to ask. If the answer is more than 10% then don’t buy from him. If a minimum than 10% then asks the following further questions.
Can I see an account statement and can you explain it? If the answer is yes, then you have to see the statement and as the profit sources and the why it comes, and it can regularly happen or some strategy will be changed. if the answer is no they don’t buy from him, because they are hiding something from you. (intelligent investor: Chapter 10)
How much average annual statement and can you explain it? This question also helps you to get the real profit of funds. If they are helping us they are good for us. If you only ask the question and they don’t as the question about your financial goal, why you hire the advisor, what is your financial worst? this type of question then leaves the place. If they asking you then you hire them with his honesty.
How much average annual return is feasible? this question asked by the advisor to the investors. And we have to explain our expectations to him.
Ask for the resume form: If you ask this you get the exact answer this guy is good for the advisor or not. Without getting a referral don’t go the investment funds, ask a minimum of three people about him.
Ask about complaints against him: If some complaints against him then see what is that and if they hurt your investment don’t buy from him. (Intelligent Investor: Chapter 10)

For this type of question, you have to ask the advisor, to make an investment in the funds for a good return.

This is all about chapter 10 of the intelligent investor book. In the next article, we see chapter 11.

charlie Munger on the hope of life and courage

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Intelligent Investor: Chapter 9

November 11, 2020 by Laxman Sonale 1 Comment

Hello friends, I am Laxman, Today article we see chapter 9 of an intelligent investor book name Investing in Investment funds. In this chapter 9 from the intelligent investor book, the author advises the average investor they don’t understand the financial concepts and the balance sheet. this type of person can be invested by hiring a well knowledgeable person in these fields i.e. investment fund management.

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Investing in Investment funds:-Intelligent Investor: Chapter 9

When investing in the investment fund, you have to set your mind if not the investment broker they lead your money with his style and give you the different ideas of stocks to buy, and increase his commission so this type of time you can also get the headache of tax. and also the author says they are good analytical but they are not good to know about the future. So so many people are expecting a bigger return from the stock by hiring these guys. so the broker uses these expectations from him they charge you the higher rate of his working. In my opinion, the author is saying is good and we have to put money in an investment fund for the five or more you.

so this type of situation happens for this purpose, we have to follow the following obstacles faced by investors.

Obstacles faced by Intelligent investors: Chapter 9

Migrating managers: When you choose some investment fund and doing investment in the fund. In form of SIP. After one year you get a good return. Then manager lives their job. This happens commonly and we have to face it. In this situation, you can ask the question to the fund manager or your broker about his contract with the investment funds.
Asset elephantiasis: There is the common human behavior is that if some broker does the good result in one and year with his limited money, then lots of other people also do the investment in this funds so broker have the maximum money and they don’t have the opportunities to invest so they buy the great company with average return company stocks. Then return falls of that broker because of Asset elephantiasis.
Increase in expense: When some investment funds give a good return but actually they also take higher charges from the investor. (Intelligent investor: Chapter 9)
Sheepish behavior of funds: This type of behavior happens from the investor because when two investors meet each other and discuss his investment return from the funds, if one of those has a higher return then the other investor called the broker and ask him about the return and they say if you can’t get the result of another fund then I will take me all money. So this behavior very well knows the fund’s manager so they do the proportion invested in the popular company and get the all are the average return. (Intelligent investor: Chapter 9)

So This obstacle what should do the intelligent investor? for this question author give one advice i.e. Buy broad market index funds.

So if you can do investment in index funds, then you have to check the quality of the broker that is as follows.

Qualification for funds that beat the market:

Managers are the biggest shareholder: Simple philosophy is that if someone’s money has in his funds that try to get the maximum return from his investment. so check for the managers as are the biggest shareholder.
Charges low fees: And also check his fund’s charges and other hidden charges, and get the low charge investment fund with the first qualification. (Intelligent investor: Chapter 9)
Dare to be different: If the manager has the power to handle funds with his technique and try to be for the maximum return.
Prevent asset elephantiasis: to prevent asset elephantiasis you have to check the fund’s performance and his asset for this purpose, by asking simple questions.
They don’t advertise: If someone is good at his work, and also see they try to advertise the funds with a big return.

After this qualification, you have to select the funds by watching the following point.

Selecting Funds;

Past performance: Check the five years of the past performance of return and also the charge returns.
Manager reputation: Check the manager’s reputation and how he stay with his reputation and how much they go in deep for the reputation. (Intelligent investor: Chapter 9)
The riskiness of funds: this check by asking the question to the broker and manager about his financial fear, and risk.
Operating Expenses: Check on the contract of investment or you can check to buy asking them.

If you can watch this thing, But in reverse order to click the logic of funds. (Intelligent investor: Chapter 9)

After this author gives some advice on when to sell.

When to sell:

Unexpected changes in strategy.
increase in expenses
Increase in tax bills
Suddenly erratic return

if this type of happening in the funds then, you can sell your investment. but you have to check the real problem.

After this you can invest in the Investment funds, So this is all about chapter 9 of the intelligent investor book name is investing in investment funds.

Elementary worldly wisdom from Charlie Munger

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