Warren Zweig Executive Summary

THE INTELLIGENT INVESTOR
A BOOK OF PRACTICAL COUNSEL
REVISED EDITION

B E NJAM I N G RAHAM
Updated with New Commentary by Jason Zweig

An e-book excerpt from

To E.M.G.

Through chances various, through all vicissitudes, we make our way. . . . Aeneid

Contents

Epigraph Preface to the Fourth Edition, by Warren E. Buffett A Note About Benjamin Graham, by Jason Zweig Introduction: What This Book Expects to Accomplish
COMMENTARY ON THE INTRODUCTION

iii viii x 1 12 18 35 47 58 65 80 88 101 112 124 133 145 155 179 188

1.

Investment versus Speculation: Results to Be Expected by the Intelligent Investor
COMMENTARY ON CHAPTER 1

2. 3.

The Investor and Inflation
COMMENTARY ON CHAPTER 2

A Century of Stock-Market
Portfolio Policy for the Enterprising Investor: The Positive Side
COMMENTARY ON CHAPTER 7

8. iv The Investor and Market Fluctuations

v

Contents
COMMENTARY ON CHAPTER 8

213 226 242 257 272 280 302 310 322 330 339 347 367 376 396 403 418 422 438 446 473 487 497 512 525 532 535

9. Investing in Investment Funds
COMMENTARY ON CHAPTER 9

10. The Investor and His Advisers
COMMENTARY ON CHAPTER 10

11. Security Analysis for the Lay Investor: General Approach
COMMENTARY ON CHAPTER 11

12. Things to Consider About Per-Share Earnings
COMMENTARY ON CHAPTER 12

13. A Comparison of Four Listed Companies
COMMENTARY ON CHAPTER 13

14. Stock Selection for the Defensive Investor
COMMENTARY ON CHAPTER 14

15. Stock Selection for the Enterprising Investor
COMMENTARY ON CHAPTER 15

16. Convertible Issues and Warrants
COMMENTARY ON CHAPTER 16

17. Four Extremely Instructive Case Histories
COMMENTARY ON CHAPTER 17

18. A Comparison of Eight Pairs of Companies
COMMENTARY ON CHAPTER 18

19. Shareholders and Managements: Dividend Policy
COMMENTARY ON CHAPTER 19

20. “Margin of Safety” as the Central Concept of
His second aim will be freedom from effort, annoyance, and the need for making frequent decisions. The determining trait of the enterprising (or active, or aggressive) investor is his willingness to devote time and care to the selection of securities that are both sound and more attractive than the average. Over many decades an enterprising investor of this sort could expect a worthwhile reward for his extra skill and effort, in the form of a better average return than that realized by the passive investor. We have some doubt whether a really substantial extra recompense is promised to the active investor under today’s conditions. But next year or the years after may well be different. We shall accordingly continue to devote attention to the possibilities for enterprising investment, as they existed in former periods and may return. It has long been the prevalent view that the art of successful investment lies first in the choice of those industries that are most likely to grow in the future and then in identifying the most promising companies in these industries. For example, smart investors—or their smart advisers—would long ago have recognized the great growth possibilities of the computer industry as a whole and