Graham and Dodd, Security Analysis Chap 2: Survey and Approach

Most people should have know or heard about this book Security Analysis which is compiled by Graham and Dodd. I have start reading this book some time ago and sometimes i find the text hard to comprehend and therefore spent more time reading the text again and again trying to understand what they are trying to project to the readers.

I decided to post summary of some chapters over here hoping someone can discuss with me about the topics in this book or i can read the chapter summary if i'm free while i'm on the go.

Nevertheless, i shall start on the chapter: Survey and Approach.
Both gurus state that How an individual looks at an investment depends on the 4 elements, mainly: Price, Time, Personality and Security.

Price is always the decision factor to an investor. Some may invest due to the fact that the price is low and the investor has these limited funds to invest, or the price volatility is high caused the investor to think that he may have the chance to profit if the price continue to rise.
However the gurus also state that the decision to invest base on price volatility is a wrong concept as they have contribute to a higher probability of paying to much for a security

Time is an issue that may affect the conclusion in many ways.
A company may be a good company presently but it may become a bad company or vice versa due to market conditions and management style.
Economy changes with time. Example can be during my time, toys are the hot property for children in the 80s. Toys' R'us investing in toy business make big bucks. However these days, video gaming is the current hot topic for kids, not toys or action figurines anymore.

Prices of stocks changes with time or cyclical.

Personality of the investor affects the way he looks at an investment. If the investor looks at making quick bucks, he may venture into speculating instead of investing

Security, both of them touch on by asking, In what business is this company doing and on what commitment that it proposed? Be it preferred stock, bonds or common stocks.
The reason is because there are differences between the 3 of them. Preferred stock ranked above common stock but it have no voting power in corporate matters. Price in common stock then to appreciate more compare to preferred.
Discussing about company business and management, they stated that for eg: automobile industry company in an unfavored industry due to competition can be a good company if it has stable assets and strong earning power.

1. Less money is lost when investors purchase unattractive enterprise on attractive terms.
2. Judge an investment based on its value and margin of safety.
3. Blue chips companies does not mean that they will stay on forever.
4. Prices of companies will correct in time to come.
5. Risk of a security cannot be explain all by using mathematical formulas such as P/E ratios, Beta or standard deviation.
6. Reading and analyzing companies' financial statement does not guarantee the security will price fairly, soundly or high earning power. Companies have ways to manipulate the numbers.
7. The primary goal of a value investor is not to make big or short term profits but to minimize the probability of losing his capital.
8. The element of stability means that past results are not easily upset by unexpected developments
9. If price is higher than analyzed figures, security may experience no margin of safety
10. Figures are important as well as deciding factors of an economy, industry, management and madness of investors