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22–29, 89–91; and bargains, 166, 173, 173n; calls on, 97–98, 139; and characteristics of intelligent investors, 13; common stocks compared with, 5n, 18–29, 56–57, 194; and convertible issues and warrants, 210–11, 406, 412, 413, 415, 417; coupons for, 98, 98n, 134, 134n, 135, 139; “coverage” for, 284; defaults on, 88–89n, 173, 287, 423, 521; and defensive investors, 22–29, 89–100, 101–11, 112n, 113, 114, 114n, 119, 121–22, 124, 125, 131, 176, 347, 350, 365; discount, 136n; distressed, 155–56n; and diversification, 283n; earnings on, 283–87; and Graham’s business principles, 523; and history and forecasting of stock market, 70, 75, 76, 77, 78, 80, 82, 87; inflation and, 5, 26, 47, 48, 50, 51, 56–57, 58n, 60n, 61n, 110; interest on, 2, 3, 5, 22–29, 70, 76, 77, 78, 89, 93–94, 95, 98, 98n, 113, 121–22, 134n, 146, 207–12, 515, 515n, 516; and investment funds, 226, 241; and investments vs. speculation, 18–22; long- and short-term, 91–92, 106–7, 188; and margin of safety, 512–13, 514, 515, 515n, 516, 520; and market fluctuations, 188, 193, 194, 207–12; and new offerings, 8, 139, 140; price of, 23–24, 135, 136n, 207–12; ratings for, 95, 210, 211, 283n, 350n; and risk, 283–87; and role of investment bankers, 268; safety of, 283–87; second-grade, 134–37, 139, 145, 147; and security analysis, 281, 283–87, 293–94, 298n; selling at par, 137; and size of enterprise, 285; taxes and, 22–25, 91–92, 93, 94, 95, 96, 96n, 99, 106, 106n, 155, 520; types of, 91–98; yield on, 5, 8–9, 27, 78, 89, 91, 92, 93, 95, 96, 97, 98, 113, 114n, 124, 125, 134, 138, 146, 193, 207–12, 404, 408n, 573. See also bond funds; convertible issues; specific company or type of bond book value, 420, 451n, 569; and aggressive investors, 289, 381, 383–84, 389, 389n, 393; and defensive investors, 348, 349, 351, 352–53, 354, 355, 359, 374–75; definition of, 374; and market fluctuations, 198–200, 198n, 203n; and per-share earnings, 320n, 321. See also specific company books, 56, 80–81 Borden Inc., 393, 395 Boski

9, 91, 92, 93, 95, 96, 97, 98, 113, 114n, 124, 125, 134, 138, 146, 193, 207–12, 404, 408n, 573. See also bond funds; convertible issues; specific company or type of bond book value, 420, 451n, 569; and aggressive investors, 289, 381, 383–84, 389, 389n, 393; and defensive investors, 348, 349, 351, 352–53, 354, 355, 359, 374–75; definition of, 374; and market fluctuations, 198–200, 198n, 203n; and per-share earnings, 320n, 321. See also specific company books, 56, 80–81 Borden Inc., 393, 395 Boskin Commission, 58n brain: and market fluctuations, 220–23 brand names, 304, 374 Brearley, Richard A.: 61 DEL bridge players analogy, 378–79 brokerage houses: and advice, 117, 257, 258n, 261–65, 262–63n, 266–68, 271, 274; discount, 129, 149, 262–63n; fees/commissions of, 117, 128–29, 128n; financial troubles of, 4, 4n, 266–68; full- service, 262–63n; margin accounts with, 21n; as part of financial enterprise industry, 360n; and portfolio policy for defensive investors, 117, 120, 129; volume of trades in, 266–68. See also online trading; specific house brokerage transactions: delivery of, 267–268, 267–68n Bronson, Gail, 444n Brooklyn Union Gas Co., 358 Brooks, John, 266n Brown Shoe, 484–85, 484n Browne, Christopher, 397 Buffett, Warren E.: and diversification, 290n; and GEICO, 533n; and indexing funds, 249, 249n; and investors’ relationship with company, 162n; and market fluctuations, 217, 217n; and “owner earnings,” 399; and per-share earnings, 327; preface by, ix–x; and security analysis, 308; selection methods of, 400, 401; “Superinvestors of Graham- and-Doddsville” talk by, 537–60. See also Berkshire Hathaway Buffett Partnership, Ltd., 543, 552 bull markets, 55, 170, 233, 525, 570; and bargains, 170, 172, 177; characteristics of, 140, 192–94; and convertible issues and warrants, 404, 405, 405n, 408; and dealings with brokerage houses, 139, 267; death/end of, 17, 142, 210; history and forecasting of, 65–73, 74, 76, 78, 80–87, 210; length of, 193n; and market fluctuations, 1

sis, 308; selection methods of, 400, 401; “Superinvestors of Graham- and-Doddsville” talk by, 537–60. See also Berkshire Hathaway Buffett Partnership, Ltd., 543, 552 bull markets, 55, 170, 233, 525, 570; and bargains, 170, 172, 177; characteristics of, 140, 192–94; and convertible issues and warrants, 404, 405, 405n, 408; and dealings with brokerage houses, 139, 267; death/end of, 17, 142, 210; history and forecasting of, 65–73, 74, 76, 78, 80–87, 210; length of, 193n; and market fluctuations, 192–94, 193n, 194, 197, 210; and new offerings, 140, 140–41n, 142, 143, 144; and portfolio policy for aggressive investors, 140, 140–41n, 142, 143, 144, 170, 172, 177 Bunker Ramo Corp., 330n Burlington Northern Railroad, 362n Burton-Dixie Corp., 393 Bush, George W., 496, 507n business: buying the, 546; definition of good, 308; knowing your, 523 business principles: of Graham, 523–24 “businessman’s investment,” 136–37 BusinessWeek, 20n, 81, 505 buy-low-sell-high approach, 192–94 “buy what you know,” 125–27, 126n buying back shares. See repurchase plans buzzwords, investing, 172n C.-T.-R. Co., 565–66 Cable & Wireless, 346 California Public Employees’ Retirement System, 146 calls, 97–98, 139, 406n, 407–8, 407n, 421 capital, 53, 302, 308–9, 320, 320n, 324–26, 401, 404, 414. See also capital gains; capitalization; return on invested capital (ROIC); specific company capital gains, 227, 571–72; and market fluctuations, 219, 224n; and portfolio for aggressive investors, 149, 180n; taxes on, 75, 180n, 219, 360, 561, 562 Capital One Financial Corp., 477–79, 479n capitalization, 123, 123n, 236, 288, 290–95, 331, 340, 384, 413, 414, 415 Career Academy, 234 Carnegie, Andrew, 185 Carnival Corp., 167n Carolina Power & Light Co., 358 Carter, Jimmy, 60n case histories: and Graham’s comparison of eight pairs of companies, 446–72; Graham’s discussion of four “extremely instructive,” 422–37; Graham’s examples of, 575–78; Zweig’s comments on four “extremely instructive,” 438–45; and Zweig’s

, 75, 180n, 219, 360, 561, 562 Capital One Financial Corp., 477–79, 479n capitalization, 123, 123n, 236, 288, 290–95, 331, 340, 384, 413, 414, 415 Career Academy, 234 Carnegie, Andrew, 185 Carnival Corp., 167n Carolina Power & Light Co., 358 Carter, Jimmy, 60n case histories: and Graham’s comparison of eight pairs of companies, 446–72; Graham’s discussion of four “extremely instructive,” 422–37; Graham’s examples of, 575–78; Zweig’s comments on four “extremely instructive,” 438–45; and Zweig’s comparison of eight pairs of companies, 473–86 cash/“cash equivalents”: and aggressive investors, 398, 400; and defensive investors, 24, 25, 102, 103–4, 105, 107, 109–10, 124; and history and forecasting of stock market, 82; and security analysis, 303, 303–4n, 308 “cash in on the calendar,” 41–42, 46 Cassidy, Donald, 253 Caterpillar, 46 Center for Research in Security Prices (University of Chicago): 30DEL Central Hudson Gas and Electric Co., 358 Central Illinois Light Co., 358 Central Maine Power Co., 358 Century Telephone Inc., 372 certificates of deposit, 97, 107, 108–9 certificates, stock, 198, 198n, 495, 495n Certified Financial Planner (CFP), 276n CGI (Commerce Group, Inc.), 481–82 Chambers, John, 184 charitable institutions, 47, 47n Chartered Financial Analyst (CFA), 264n, 265, 265n Chase Manhattan Bank, 450n Checkers Drive-In Restaurants, 216 chemical companies, 291, 291n, 292 Chesterton, G. K., 87 Cheung, Alexander, 15, 15–16n Chicago and Northwestern Railway Co., 317n Chicago, Milwaukee, St. Paul and Pacific bonds, 135 China: stock market in, 437n Chiron Corp., 370 Chromatis Networks, 439–40 Chrysler Corp., 165, 167, 168, 250, 289, 293, 351, 352, 354 Chubb Corp., 372 CIBC Oppenheimer, 40–41 Cincinnati Gas & Electric Co., 358 Cingular Wireless, 327 Cisco Systems, Inc., 14, 81, 116n, 184, 217n, 247, 473–75, 505 Cleveland Electric Co., 357 CleveTrust Realty Investors, 414 Clorox Co., 372 closed-end funds, 141n, 226, 226n, 227, 238–41, 252–53, 253n, 420, 495n CMGI,

, Milwaukee, St. Paul and Pacific bonds, 135 China: stock market in, 437n Chiron Corp., 370 Chromatis Networks, 439–40 Chrysler Corp., 165, 167, 168, 250, 289, 293, 351, 352, 354 Chubb Corp., 372 CIBC Oppenheimer, 40–41 Cincinnati Gas & Electric Co., 358 Cingular Wireless, 327 Cisco Systems, Inc., 14, 81, 116n, 184, 217n, 247, 473–75, 505 Cleveland Electric Co., 357 CleveTrust Realty Investors, 414 Clorox Co., 372 closed-end funds, 141n, 226, 226n, 227, 238–41, 252–53, 253n, 420, 495n CMGI, Inc., 215, 217, 481–82, 481n CNBC, 342n CNF Inc., 330n CNN, 255 Coca-Cola, 217, 224, 224n, 304, 307, 372, 401 Cohen, Abby Joseph, 190n Cohen & Steers Realty Shares, 63 coin flipping, 538, 539, 540 coins, buying and selling, 56 Colgate-Palmolive, 321n College Marketing Group, 481n Columbia Gas System, 357 Columbia Real Estate Equity Fund, 63 Comerica Inc., 372 Comiskey, Eugene, 329 Commerce One, Inc., 477–79 commercial banks, 97, 231, 257, 270, 360n, 429, 429n common stock: and advice, 269, 271; for aggressive investors, 134, 136, 139, 155–78, 156n, 376–95; and asset allocation, 10, 89–91, 156–57; bonds compared with, 5n, 18–29, 56–57, 194; characteristics of, 156; for defensive investors, 22–29, 89–91, 99, 111, 112–23, 124–32, 176, 337–38, 347, 348–66; dividends on, 22, 99, 114–15, 285n, 294–95, 334, 570, 571, 572; earnings on, 115, 288–301, 569; expected growth (1963 and 1969) of, 295–97; general long- term prospects for, 291; general observations on, 335–38; as growth stock, 115–17, 157–62, 295–98, 517; and history and forecasting of stock market, 70, 73, 74, 75, 76, 78; inflation and, 47–57; investment merits of, 112–14; investment rules for, 175–78; and investments vs. speculation, 18–22; investor’s personal situation and, 119–21; as “junior stock issues,” 285n; and margin of safety, 513–18, 571, 574; and market fluctuations, 188, 189, 193, 194, 195–97, 199–200, 201, 203, 205; performance of, 229; portfolio changes in, 117; price decline in, 3; price record of, 406; pu

7, 157–62, 295–98, 517; and history and forecasting of stock market, 70, 73, 74, 75, 76, 78; inflation and, 47–57; investment merits of, 112–14; investment rules for, 175–78; and investments vs. speculation, 18–22; investor’s personal situation and, 119–21; as “junior stock issues,” 285n; and margin of safety, 513–18, 571, 574; and market fluctuations, 188, 189, 193, 194, 195–97, 199–200, 201, 203, 205; performance of, 229; portfolio changes in, 117; price decline in, 3; price record of, 406; public attitude toward, 19–20, 20n; return on, 113, 377; and risk, 20–21, 121–22, 394; security analysis of, 281, 285, 288–301, 330–38, 339–46; selection of, 114–15, 134, 136, 139, 155, 156n, 157, 158, 160, 166, 169, 176–77, 178, 347, 348–66; valuation of, 288–90, 569–70; Value Line Forecast (1967–69) about, 289. See also specific topic Commonwealth Edison Co., 357 companies: change in character of, 203; comparison of eight pairs of, 446–72, 473–86; comparison of four listed, 330–38, 339–46; emotional imagery of, 474; general observations about, 469–72; investors’ relationship with, 162, 162n, 203; Johnny-One- Note, 304; with large amounts of convertible issues (1969), 412; “large, prominent, conservatively financed,” 122–23, 195; second-line, 196, 196n; unpopular large, 163–66, 168, 183. See also case histories; companies (cont.) corporations; secondary companies; specific company computer industry, 6–7, 30, 172, 172n, 437 Comverse Technology, 186 ConAgra Foods, 372 Cone Mills, 391 conflicts of interest, 497, 500 conglomerates, 3, 411, 438, 440 Conseco, 14, 426n Consolidated Edison, 357, 372, 567–68 Consolidated Gas of New York, 567–68 Consolidated Natural Gas Co., 357 Consolidated Rail Corp. (Conrail), 425n Consolidation Coal, 293 consumer-finance firms, 360n Consumer Price Index, 58n, 59 Consumers Power Co., 358 contract: investment owner’s, 219, 225, 529 convertible issues: and aggressive investors, 134, 173n, 381; and defensive investors, 90, 97, 99, 100; example of w

conflicts of interest, 497, 500 conglomerates, 3, 411, 438, 440 Conseco, 14, 426n Consolidated Edison, 357, 372, 567–68 Consolidated Gas of New York, 567–68 Consolidated Natural Gas Co., 357 Consolidated Rail Corp. (Conrail), 425n Consolidation Coal, 293 consumer-finance firms, 360n Consumer Price Index, 58n, 59 Consumers Power Co., 358 contract: investment owner’s, 219, 225, 529 convertible issues: and aggressive investors, 134, 173n, 381; and defensive investors, 90, 97, 99, 100; example of working of, 418–19n; Graham’s discussion about, 403–13; as junior to other long-term debt, 419–20n; and market fluctuations, 210–11; and per-share earnings, 316, 318, 411, 414, 416; Zweig’s comments about, 418–21. See also warrants; specific company Cooper Industries, 461n corporate bonds, 24, 403, 520; and aggressive investors, 134n; and defensive investors, 92, 95, 111, 350n; and inflation, 50; and investment funds, 241; and market fluctuations, 203–4, 207–12; return on, 404–5n; and security analysis, 283, 283n corporations: debt of, 53–54, 134; and fluctuations in bond prices, 211–12; governance of, 206–7, 206n; investors’s relationship with, 162, 162n, 203; “large, prominent, conservatively financed,” 122–23, 195; misleading reporting by, 236; taxes on, 99, 99n, 177; unpopular large, 163–66, 168, 183. See also companies; corporate bonds; specific corporation costs. See expenses/costs; fees/commissions coupons, 98, 98n, 134, 134n, 135, 139 Cowles Commission, 65, 66 Cramer, James J., 16, 16n, 217n Crandall, Pierce & Co., 193n crash, stock market: of 1929, 191, 236; of 1987, 141n, 401, 507n; of 2000, 14, 124, 141n, 173n, 291n, 437n credit companies: investing in, 360–61 credit ratings, 134, 160, 420n, 573 Criterion Insurance Co., 533n CSX Corp., 362n, 425n “customer financings,” 439, 440 “customers’ brokers,” 263, 264, 271 “Daddy-Knows-Best,” 490n, 503–4 Damasio, Antonio, 223 Dana Corp., 375 Dante Alighieri, 535–36 Data General Corp., 342 Davis, Christopher, 308, 397, 398,

, 16, 16n, 217n Crandall, Pierce & Co., 193n crash, stock market: of 1929, 191, 236; of 1987, 141n, 401, 507n; of 2000, 14, 124, 141n, 173n, 291n, 437n credit companies: investing in, 360–61 credit ratings, 134, 160, 420n, 573 Criterion Insurance Co., 533n CSX Corp., 362n, 425n “customer financings,” 439, 440 “customers’ brokers,” 263, 264, 271 “Daddy-Knows-Best,” 490n, 503–4 Damasio, Antonio, 223 Dana Corp., 375 Dante Alighieri, 535–36 Data General Corp., 342 Davis, Christopher, 308, 397, 398, 399, 400 Davis Funds, 250, 397, 398, 399, 400 day trading, 37, 39, 40n, 148, 528n Dayton Power & Light Co., 358 debt: and aggressive investors, 385; corporate, 53–54, 134; and defensive investors, 348, 349, 352–53, 355, 370, 371; and dividends, 492; of emerging markets, 108–9; limit on, of U.S. government, 94, 96; and margin of safety, 513; of public utilities, 348; and security analysis, 303, 308; and selection of stock, 348, 349, 352–53, 355, 370, 371, 385. See also bonds; specific company or type of bond Deere & Co., 173 defaults, 287, 521; and bargains, 173, 173n; on bonds, 88–89n, 173, 287, 423, 521; and portfolio policy for aggressive investors, 138, 145, 147, 155–56n, 173, 173n defensive investors: characteristics of, 6; definition of, 22; exclusions for, 176–77; expectations for, 22–29; and inflation, 47–57; and investments vs. speculation, 18–29; and margin of safety, 515–16, 524; and market fluctuations, 199–200; and mixing aggressive and defensive, 176, 178; portfolio for, 89–100, 101–11, 112–23, 124–32; return for, 22–29, 25n, 27, 176; rules for, 176–77; and security analysis, 294–95, 347–66; selectivity for, 363–66; stock selection for, 347–66, 385n; Zweig’s comments about, 367–75. See also specific topic deflation, 51, 58n, 61n delisted stocks, 385n Delmarva Power & Electric Co., 358 Deltona Co., 234 depreciation, 316, 398, 492 Depression (1930s), 72, 131, 137, 170, 203, 213, 417, 521 Detroit Edison Co., 357 diamonds, 56 dilution: and convertible issues and

or, 89–100, 101–11, 112–23, 124–32; return for, 22–29, 25n, 27, 176; rules for, 176–77; and security analysis, 294–95, 347–66; selectivity for, 363–66; stock selection for, 347–66, 385n; Zweig’s comments about, 367–75. See also specific topic deflation, 51, 58n, 61n delisted stocks, 385n Delmarva Power & Electric Co., 358 Deltona Co., 234 depreciation, 316, 398, 492 Depression (1930s), 72, 131, 137, 170, 203, 213, 417, 521 Detroit Edison Co., 357 diamonds, 56 dilution: and convertible issues and warrants, 411, 416, 417; and per- share earnings, 311–12, 312n, 315, 316, 316n, 317, 318; and repurchase plans, 507n, 508. See also specific company Dimson, Elroy, 61n, 82, 113n direct purchase of stock, 128–29 directors, 309, 414, 488, 498, 499n, 500, 501, 502, 511 discount brokerage houses, 129, 149, 262–63n Discover Brokerage, 38–39 diversification, 56, 87, 283n, 420; and advice, 259n, 273; and aggressive investors, 145, 173n, 381, 387–90, 391, 392–93; and defensive investors, 114, 129, 129n, 130, 347, 365, 368–69, 371; and delisted stocks, 385n; and formula trading, 45; and Graham’s disciples, 542; importance of, 532, 535n; and investment funds, 239, 245, 253; and investments vs. speculation, 37; and margin of safety, 515, 516, 517, 518–19, 519n, 521, 522, 529, 531; and market fluctuations, 219; and security analysis, 283n, 290, 290n dividends: academic criticism of, 494, 494n; and advice, 258, 264n; and bargains, 166, 169, 172; cumulative or noncumulative, 99; and earnings, 493–94, 506, 506n; and expectations for defensive investors, 22–24, 25, 25n, 26, 27; fixed, 99; and formula trading, 44, 45; Graham’s comments about, 489–96; and growth, 490, 491–92, 506; and history and forecasting of stock market, 65, 67, 69–70, 71, 72, 76, 77, 78, 80n, 85; inflation and, 48, 50, 52, 55; and investor-management relations, 489–96, 490n, 503–4, 511; and margin of safety, 514, 516, 523; and market fluctuations, 191, 193, 202, 205, 207, 509n; overview about, 489–96; and “payout ratio

–94, 506, 506n; and expectations for defensive investors, 22–24, 25, 25n, 26, 27; fixed, 99; and formula trading, 44, 45; Graham’s comments about, 489–96; and growth, 490, 491–92, 506; and history and forecasting of stock market, 65, 67, 69–70, 71, 72, 76, 77, 78, 80n, 85; inflation and, 48, 50, 52, 55; and investor-management relations, 489–96, 490n, 503–4, 511; and margin of safety, 514, 516, 523; and market fluctuations, 191, 193, 202, 205, 207, 509n; overview about, 489–96; and “payout ratio,” dividends (cont.) 294n, 489n; and per-share earnings, 323; and performance (1871–1970), 71; and portfolio policy for aggressive investors, 134n, 136, 137, 145n, 166, 169, 172; and portfolio policy for defensive investors, 43, 91, 98, 99, 99n, 111, 113, 113–14n, 114–15, 115n, 116, 118, 121, 122, 128; and price, 490, 491, 494n; proper stock, 493; record of paying, 114–15, 115n; reinvestment of, 128, 489–92; of secondary companies, 172; and security analysis, 283, 285n, 288, 294–95, 298, 298n, 302, 309; special, 494n; and speculation, 489, 490, 570, 571, 572; and stock selection for aggressive investors, 384, 386, 388, 390; and stock selection for defensive investors, 337, 348, 349, 350, 351, 352–53, 356, 356n, 362, 365, 371, 372; stock split and, 492–96, 493n; taxes on, 22–23, 24–25, 99, 294n, 495–96, 496n, 507n, 561, 562; total dollar amount of, by U.S. stocks, 503n; and volatility, 509, 509n; who pays, 504; Zweig’s comments about, 502–6. See also yield; specific company or type of security Dixon, Richard, 47n Dodd, David, 542; See also Security Analysis (Graham and Dodd) “Dogs of the Dow,” 164, 164n dollar-cost averaging, 2, 28–29, 75, 118, 130–31, 131n, 180n, 194, 529 Dollar General stores, 368 Donaldson, Lufkin & Jenrette, 443 Donnelley (R.R.) & Sons, 372 dot.com stocks, 172n, 530 Double Click Inc., 418–19n Dover Corp., 372 Dow Chemical Co., 317 Dow Jones Industrial Average (DJIA): aggressive investors and, 136, 158, 161, 163, 164, 164n, 165–66, 171, 376, 387–90;

of security Dixon, Richard, 47n Dodd, David, 542; See also Security Analysis (Graham and Dodd) “Dogs of the Dow,” 164, 164n dollar-cost averaging, 2, 28–29, 75, 118, 130–31, 131n, 180n, 194, 529 Dollar General stores, 368 Donaldson, Lufkin & Jenrette, 443 Donnelley (R.R.) & Sons, 372 dot.com stocks, 172n, 530 Double Click Inc., 418–19n Dover Corp., 372 Dow Chemical Co., 317 Dow Jones Industrial Average (DJIA): aggressive investors and, 136, 158, 161, 163, 164, 164n, 165–66, 171, 376, 387–90; and bargains, 171; “best” stocks in, 363; and comparison of four listed companies, 332, 333, 334, 335–36; defensive investors and, 91, 113, 114–15, 115n, 118, 347, 350–54, 356, 363, 367; and dividend return on common stocks, 22; in early 1970s, 4, 72–79; and expectations for investors, 23, 24, 25, 27, 27n, 28, 33, 34; and formula trading, 44, 46; growth of, 297; and growth stocks, 158; and history and forecasting of stock market, 66, 67, 69, 70–71, 72–73, 74, 75, 76, 78, 79, 81; inflation and, 50, 51–55, 57; and investment funds, 231, 231n, 233; and market fluctuations, 190n, 191–92, 193n, 195, 196, 200, 201, 202, 208; and per-share earnings, 319–21; and Raskob’s prescription, 2; rise of (1915–70), 50; and security analysis, 289, 291, 292, 294, 295–97, 299; and selection of stocks, 347, 350–54, 356, 363, 367, 376, 387–90; and unpopular large companies, 163, 164, 164n, 165–66; yield of stocks (2003) on, 5n. See also specific company “Dow Theory,” 3, 33, 191–92, 195 Dreman, David, 374, 400 Drew, Daniel, 312n Drexel Burnham Lambert, 164n, 187, 429n, 488n Drexel Firestone Co., 164, 164n Dreyfus Fund, 230 drug industry, 30 Du Pont Co., 289, 292, 351, 352 Du Pont, Glore, Forgan & Co., 266n dual-purpose funds, 228, 228n due diligence, 274, 275, 375, 375n Dundee, Angelo, 145 Durand, David, 199n, 570 e*Trade, 126 “earning power,” 53, 513, 513–14n, 514–15, 514n, 515–16, 517, 518, 568 earnings: and advice, 264n; average, 319–21; and bargains, 166, 167–69, 173; on capital funds, 320

00 Drew, Daniel, 312n Drexel Burnham Lambert, 164n, 187, 429n, 488n Drexel Firestone Co., 164, 164n Dreyfus Fund, 230 drug industry, 30 Du Pont Co., 289, 292, 351, 352 Du Pont, Glore, Forgan & Co., 266n dual-purpose funds, 228, 228n due diligence, 274, 275, 375, 375n Dundee, Angelo, 145 Durand, David, 199n, 570 e*Trade, 126 “earning power,” 53, 513, 513–14n, 514–15, 514n, 515–16, 517, 518, 568 earnings: and advice, 264n; average, 319–21; and bargains, 166, 167–69, 173; on capital funds, 320, 320n; “consensus” about, 374; debt and profits on capital (1950–69), 53; and dividends, 493–94, 506, 506n; and expectations for investors, 25n, 27, 33; hiding true, 428n; and history and forecasting of stock market, 65, 69–70, 71, 72, 76, 77, 78, 85, 86; inflation and, 49, 51–55; and margin of safety, 513, 515n, 516–17; and market fluctuations, 200, 202; owner, 308, 398, 399; and per-share earnings, 315–16, 316–17n; and performance (1871–1970), 71; and portfolio policy for aggressive investors, 134, 135, 136, 140, 146, 147, 160, 163, 165, 166, 167–69, 172, 173, 181, 182, 183; and portfolio policy for defensive investors, 115, 115n, 116; real, 424; and repurchase plans, 507, 509n; and security analysis, 281, 283, 284, 288, 290, 291, 292, 293, 294, 295, 296, 298, 305, 308; and speculation, 569; and stock selection for aggressive investors, 382–83, 384, 386, 388, 390, 392, 400; and stock selection for defensive investors, 337, 348, 349, 352–53, 354, 356, 364, 365, 371, 374. See also “earning power”; per-share earnings; price/earnings ratio; specific company or type of security earnings-covered test, 283–87 Eastman Kodak Co., 46, 289, 351, 352 EDGAR database, 186, 250, 302–3, 306–7, 324n, 375, 399, 438n Edison Electric Light Co., 21n Edward VII (king of Great Britain), 313, 313n “efficient markets hypothesis” (EMH), 363, 363n, 380, 380n Electric Autolite Co., 330 Electronic Data Systems, 375 electronics industry, 30, 172, 172n, 337, 437 Elias, David, 80 Ellis, Charles, 101, 2

rning power”; per-share earnings; price/earnings ratio; specific company or type of security earnings-covered test, 283–87 Eastman Kodak Co., 46, 289, 351, 352 EDGAR database, 186, 250, 302–3, 306–7, 324n, 375, 399, 438n Edison Electric Light Co., 21n Edward VII (king of Great Britain), 313, 313n “efficient markets hypothesis” (EMH), 363, 363n, 380, 380n Electric Autolite Co., 330 Electronic Data Systems, 375 electronics industry, 30, 172, 172n, 337, 437 Elias, David, 80 Ellis, Charles, 101, 256, 526n eltra Corp., 330–38, 330n, 383 EMC Corp., 160n, 339–46, 342n emerging-market nations, 108–9, 148, 148n Emerson, Ralph Waldo, 396 Emerson Electric Co., 330–38, 330n, 335n, 339–46, 372 Emery Air Freight, 330–38, 330n, 336–37n Emhart Corp., 330–38, 330n, 383 employee-purchase plans, 432, 433n employees: stock options for, 323. See also managers/management endowment funds, 194, 194n, 235, 235n “enhancing shareholder value,” 309, 508–9, 508n Enron Corp., 14, 127, 423n, 429n, 497, 500–501 enterprising investors. See aggressive investors EPS. See per-share earnings Erie Railroad, 312n ethics, 143n, 262, 262n, 269, 276n, 280 eToys Inc., 443–45, 443–44n Eversharp Co., 409 exchange-traded index funds (ETFs), 226n, 253, 253n Exodus Communications, Inc., 339–46 Expeditors International of Washington, Inc., 307, 339–46 expenses/costs: controlling ownership, 219; and convertible issues and warrants, 419n, 420, 420n; of doing business, 317n; of investment funds, 247, 248, 249, 251, 252, 253, 254; of mutual funds, 376–77, 377n; of options, 421; and per-share earnings, 317n; of research, 376–77, 379n; and stock selection for aggressive investors, 376–77, 377n, 379n; and stock selection for defensive investors, 367; of trading, 363n, 377n, 379n, 385n. See also fees/commissions Factiva, 399 “fair-weather investments,” 521 Fama, Eugene, 504 Family Dollar Stores, 216, 372 Farley, William, 317n Fastow, Andrew, 500–501 Faust (Goethe), 415–16 favorite stocks, 247, 247n Fedders Co., 234

253, 254; of mutual funds, 376–77, 377n; of options, 421; and per-share earnings, 317n; of research, 376–77, 379n; and stock selection for aggressive investors, 376–77, 377n, 379n; and stock selection for defensive investors, 367; of trading, 363n, 377n, 379n, 385n. See also fees/commissions Factiva, 399 “fair-weather investments,” 521 Fama, Eugene, 504 Family Dollar Stores, 216, 372 Farley, William, 317n Fastow, Andrew, 500–501 Faust (Goethe), 415–16 favorite stocks, 247, 247n Fedders Co., 234 Federal National Mortgage Association (“Fannie Mae”), 110 Federal Reserve Board, 2n, 19–20n, 50, 121 fees/commissions: for advice, 258, 262, 263, 263n, 266, 270, 274, 274n, 275; for aggressive investors, 145n, 148–50, 148n, 149n, 180n; of brokerage houses, 117, 128–29, 128n; controlling, 219; and convertible issues and warrants, 419n; of investment funds, 227, 227n, 238n, 242, 246, 247, 249n, 250, 253n; and IPOs, 139n; and market fluctuations, 200, 219; and portfolio changes, 117; on reinvestments, 253n; and timing, 180n. See also expenses/costs Fidelity Funds, 15n, 37, 63, 64, 107, 110, 125, 148n, 230, 245–46, 250, 400, 420, 420n 50–50 plan, 5, 90–91, 156–57 financial analysts, 14, 264n, 498n, 501n; and advice, 262n, 263, 264–65, 271; collective intelligence of, 380n; consensus opinion of, 378; as creating valuation, 568, 570; flaw in approach to selection by, 379; and forecasting, 265n; functions of, 263, 265, 265n, 378; and institutional investors, 265n; and investments vs. speculation, 28–29; and margin of safety, 517; and market fluctuations, 190, 206; requirements for, 264; role of, 263, 280–81; senior and junior, 300; and speculation, 563, 568, 570, 574; and stock selection for aggressive investors, 376, 378; and stock selection for defensive investors, 363. See also securities analysis financial condition: and common stock, 293–94; and dividends, 492; and security analysis, 302, 308–9; and stock selection for aggressive investors, 384, 385, 386, 388, 401; and stock

lation, 28–29; and margin of safety, 517; and market fluctuations, 190, 206; requirements for, 264; role of, 263, 280–81; senior and junior, 300; and speculation, 563, 568, 570, 574; and stock selection for aggressive investors, 376, 378; and stock selection for defensive investors, 363. See also securities analysis financial condition: and common stock, 293–94; and dividends, 492; and security analysis, 302, 308–9; and stock selection for aggressive investors, 384, 385, 386, 388, 401; and stock selection for defensive investors, 337, 348, 349, 350, 369. See also specific company Financial Corp. of America, 187 financial developments: major, 14–15 financial institutions/industry, 139, 269, 360–61, 411n. See also type of institution or specific institution financial markets: history and forecasting of, 1–2, 10, 24n, 54, 54n, 65–79, 80–87. See also stock market financial plan, 273, 278 financial planners, 129, 258n, 259n, 263n, 270n, 274, 274n, 276 financial reports. See financial statements; specific report financial service organizations/industry, 259–62, 360n financial statements, 236, 324n, 328–29, 328n, 399, 432, 439, 442, 509n. See also per-share earnings; security analysis; type of report First Tennessee National Bank, 372 Firsthand mutual funds, 81, 126, 243–45 Fischhoff, Baruch, 127 Fisher, Kenneth, 185n Fisher, Lawrence, 67n fixed-value investments, 512–13. See also type of investment Fleet Boston Financial Corp., 384n Florida real estate, collapse of, 144 fluctuations, market, 4, 188–225, 236n, 509n; and aggressive investors, 33; and asset allocation, 197; in bond prices, 207–12; book value and, 198–200, 198n, 203n; and brain, 220–23; and buy-low-sell-high approach, 192–94; and defensive investors, 189; example of, 200–205; and forecasting, 189–92, 190n, 206, 210; and formula investment plans, 194–95, 195n; as guide to investment decisions, 189–92; history of (1871–1972), 65–72; of investor’s portfolio, 195–97; managers and, 206–7; and margin of safety

ations, market, 4, 188–225, 236n, 509n; and aggressive investors, 33; and asset allocation, 197; in bond prices, 207–12; book value and, 198–200, 198n, 203n; and brain, 220–23; and buy-low-sell-high approach, 192–94; and defensive investors, 189; example of, 200–205; and forecasting, 189–92, 190n, 206, 210; and formula investment plans, 194–95, 195n; as guide to investment decisions, 189–92; history of (1871–1972), 65–72; of investor’s portfolio, 195–97; managers and, 206–7; and margin of safety, 525; and mispricing of stock, 212–13; Morgan’s comments about, 54, 54n; and Mr. Market parable, 204–5, 212–25; and other people’s mistakes, 221, 223; silver lining to, 17, 224; timing and pricing of, 189–92, 206; and valuation, 188, 189, 195–207, 211, 212–13 FMC Corp., 545–46, 559–60 Food and Drug Administration, U.S., 167n “The Foolish Four” trading, 44–46 footnotes to financial statements, 315, 328–29, 328n, 399, 432, 439 Forbes magazine, 185, 185n, 337n forced sale of stock, 203, 204 forecasting: addiction to, 221, 223; and advice, 260–61; and aggressive investors, 179–80, 184, 378; and “consensus” earnings, 374; and defensive investors, 131–32, 364, 364n, 374; and financial analysts, 265n; and history of stock market, 72–79, 80–87; of inflation, 48, 50, 54, 54n; and investment funds, 255; and investments vs. speculation, 24n; and market fluctuations, 189–92, 190n, 206, 210; and Raskob’s prescription, 2; reliability of, 10; and security analysis, 281, 282n, 288–89, 291n, 293n, 298, 299; and selection of stock, 364, 364n, 374, 378; and speculation, 572; and timing, 179–80; the unpredictable, 378 foreign stocks/bonds, 134, 138, 148, 148n, 176–77, 186–87, 239–40, 250, 252 formula investing/trading, 28–29, 41–46, 90–91, 192. See also specific formula formula plans/planners, 194–95, 195n formula timing, 156–57 Fortune 500 list, 181, 426n, 500 Four Seasons Nursing, 234 401(k) plans, 64, 104, 105, 106, 111n, 126–27, 147, 215, 249 FPA Capital Fund, 397, 400 “franchise” co

98, 299; and selection of stock, 364, 364n, 374, 378; and speculation, 572; and timing, 179–80; the unpredictable, 378 foreign stocks/bonds, 134, 138, 148, 148n, 176–77, 186–87, 239–40, 250, 252 formula investing/trading, 28–29, 41–46, 90–91, 192. See also specific formula formula plans/planners, 194–95, 195n formula timing, 156–57 Fortune 500 list, 181, 426n, 500 Four Seasons Nursing, 234 401(k) plans, 64, 104, 105, 106, 111n, 126–27, 147, 215, 249 FPA Capital Fund, 397, 400 “franchise” companies, 172, 172n, 374, 401, 422, 433–37 Franklin, Benjamin, 124, 505 Franklin Utilities, 354n fraud, 14, 236, 324n, 369, 413, 429n, 442n, 450n French, Kenneth, 504 French assignats, 415, 415n Fridson, Martin, 329 Friend-Blume-Crockett study, 377, 377n friends or relatives: advice from, 270 Froelich, Robert, 81 Fruit of the Loom, 317n fund industry. See investment funds Fundamental Investments Co., 230 Galbraith, Steve, 38n, 369 Galileo Select Equities Fund, 245 Gallup Organization, 83, 84 Galvin, Thomas, 190n “gambler’s fallacy,” 458n gambling, 19n, 21, 36, 46, 199n, 368, 464, 518–19, 519n, 525, 530, 535, 535n Gannett Co., 372 Gardner, John, 438 Gates, Bill, 162n, 185 GEICO. See Government Employees Insurance Co. General American Investors, 241 General Electric Co., 55, 160, 181, 182, 183, 247, 289, 295–97, 351, 352, 372, 575–73 General Foods Corp., 289, 351, 352 General Motors Corp., 2, 46, 166, 289, 292, 295–97, 351, 352, 410n Generally Accepted Accounting Principles (GAAP), 316n, 325n Georgeson Shareholder, 501n Gillette, 217, 304, 307, 401 Glassman, James K., 80, 102n Global Crossing Ltd., 14, 127, 303, 304n, 324–25, 325n, 326, 497 Goethe, Johann Wolfgang Von, 415–16 gold, buying, 55, 55–56n Goldman Sachs & Co., 404n, 443 good decisions: factors that characterize, 528–29 Goodbody & Co., 266n goodwill, 374, 389, 389n, 390, 392, 398, 428, 439, 440, 441n, 453, 568 Goodyear Tire Co., 289, 351, 352 Gordon, Robert N., 224n Gordon equation, 25n Government Employees Financial

325n Georgeson Shareholder, 501n Gillette, 217, 304, 307, 401 Glassman, James K., 80, 102n Global Crossing Ltd., 14, 127, 303, 304n, 324–25, 325n, 326, 497 Goethe, Johann Wolfgang Von, 415–16 gold, buying, 55, 55–56n Goldman Sachs & Co., 404n, 443 good decisions: factors that characterize, 528–29 Goodbody & Co., 266n goodwill, 374, 389, 389n, 390, 392, 398, 428, 439, 440, 441n, 453, 568 Goodyear Tire Co., 289, 351, 352 Gordon, Robert N., 224n Gordon equation, 25n Government Employees Financial Corp., 533n Government Employees Insurance Co. (GEICO), 228n, 494, 532–33, 532–33n, 535, 535n Government National Mortgage Association (“Ginnie Mae”), 110 Graham, Benjamin: Buffett’s tribute to, ix, x; business principles of, 523–24; definition of investment of, 19, 35, 35n, 45; disciples of, 537–60; forecasts of, 25, 25n; misjudgements of, 49–50, 50n; Zweig’s comments about, xi–xiv Graham, John R., 180, 180n Graham-Newman Corp., 228n, 380–83, 380n, 533n, 541 Graham-Newman methods: summary of, 380–83 Graham’s Law, 46 Grainger (W. W.), 372 Great Atlantic & Pacific Tea Co., 200–205, 202n greed, 197, 437, 437n Greenspan, Alan, 179–80 Group Rexel, 469n growth, 15, 228, 264n, 414; average, 319–21; calculation of past rate of, 319–21; definition of, 157; and dividends, 490, 491–92, 506; and history and forecasting of stock market, 73, 85, 87, 184; and margin of safety, 516, 517; and market fluctuations, 9, 199n; mutual funds for, 158n, 159n, 161, 228n; and per-share earnings, 319–21, 321n; and portfolio policy for aggressive investors, 156, 157–62, 158–59n, 181–84; and portfolio policy for defensive investors, 114, 115–17, 123; real, 85, 87; and risk, 160; and security analysis, 281, 282, 282n, 294–98, 300, 305; slow down in, 321n; speculative, 85, 87, 569, 570; and stock selection for aggressive investors, 379, 384, 386, 390, 392, 401; and stock selection for defensive investors, 338, 347, 348, 349–50, 352–53, 354, 355, 356, 364, 369, 371, 374; and types of investors, 6–8. S

and portfolio policy for aggressive investors, 156, 157–62, 158–59n, 181–84; and portfolio policy for defensive investors, 114, 115–17, 123; real, 85, 87; and risk, 160; and security analysis, 281, 282, 282n, 294–98, 300, 305; slow down in, 321n; speculative, 85, 87, 569, 570; and stock selection for aggressive investors, 379, 384, 386, 390, 392, 401; and stock selection for defensive investors, 338, 347, 348, 349–50, 352–53, 354, 355, 356, 364, 369, 371, 374; and types of investors, 6–8. See also specific company Guerin, Rick, 544 Gulf & Western Inc., 412 Gulf Oil, 488n H & R Block, Inc., 401, 455–58, 456n, 470 Harley Davidson, 304 Harvey, Campbell R., 180, 180n Hassett, Kevin A., 80, 102n Hawkins, O. Mason, 399–400 Hayden, Stone & Co., 266n Haydon Seitch and Instrument Co., 576 Hazlitt, William, 313n hedging: and aggressive investors, 381; and convertible issues and warrants, 420n; and defensive investors, 106n; and definition of intelligent investors, 13, 13n; and expectations for investors, 26n, 32, 33n; and half a hedge, 61; and inflation, 55–56, 61; and investment funds, 226–27, 227n; “related” and “unrelated,” 381, 381n, 382, 382n Heine, Max, 396 Heinz (H.J.), 373 Hennessy funds, 44n herding, 247, 546 high-yield bonds. See junk bonds Hoffman, Mark, 478, 479 “home bias,” 127 Home Depot, 181, 182, 183 Honda, 250 Honeywell Corp., 330n Horizon Corp., 234 hostile takeovers, 32–33n, 429n, 488n Household International, 373 Housing and Urban Development (HUD), U.S. Department of, 96n Housing Authority bonds, 94–95, 96 Houston Light & Power Co., 357 “How much?” question, 8–9, 15 Hudson Pulp & Paper, 543 “human factor” in selection, 365 Huron Consulting Group, 324n hyperinflation, 60n I-bonds, 110 Ibbotson Associates, 61n, 62, 131, 131n, 404n, 419 “In the Money” (CNN-TV), 126n income, 106–7, 136, 259, 398, 419, 421, 516, 571–72. See also specific company income bonds, 99–100, 136 income tax. See taxes “incubated funds,” 246 indexing funds: and advice, 277n; and

rtment of, 96n Housing Authority bonds, 94–95, 96 Houston Light & Power Co., 357 “How much?” question, 8–9, 15 Hudson Pulp & Paper, 543 “human factor” in selection, 365 Huron Consulting Group, 324n hyperinflation, 60n I-bonds, 110 Ibbotson Associates, 61n, 62, 131, 131n, 404n, 419 “In the Money” (CNN-TV), 126n income, 106–7, 136, 259, 398, 419, 421, 516, 571–72. See also specific company income bonds, 99–100, 136 income tax. See taxes “incubated funds,” 246 indexing funds: and advice, 277n; and aggressive investors, 180, 396; Buffett’s advice about, 249n; compulsory holdings for, 476; and convertible issues and warrants, 419n; and defensive investors, 124, 130, 132, 347n, 367, 368, 375n; flaws of, 249; and investment funds, 248–49, 248n, 249; and market fluctuations, 219; and security analysis, 290n; of total U.S. stock market, 347n, 367. See also exchange-traded index funds (ETFs) industrial bonds, 155, 284, 285, 287 Industrial National Bank of Rhode Island, 384, 384n industrial stocks, 359, 387–90 industry: analysis of, 298–99; predicting growth of, 6–8, 6–7n inflation, 3, 24, 47–57, 58–64, 294; accuracy of rate of, 58n; as dead, 58, 58n, 59–60; and defensive investors, 23, 25n, 26, 26n, 102, 113, 114, 364n; and history and forecasting of stock market, 48, 50, 54, 54n, 83, 85, 86, 87; and money illusion, 59–60; nominal and real, 59; and price, 49, 61, 62; protection against, 23, 55–56, 61–64; and Raskob’s prescription, 2n; and returns/yield, 50, 54, 57, 62; and risk, 47n, 55, 57; and taxes, 50, 63–64; and value, 58. See also type of security Informix Corp, 328–29n InfoSpace, Inc., 323, 428–29n initial public offerings (IPOs), 139, 139n, 140, 140–41n, 142–43n, 150–54, 246, 270n, 312n, 434–35, 435n, 438, 444n, 528n. See also specific company Inktomi Corp., 212–13 Insana, Ron, 342n insider trading, 479n institutional investors, 115, 194, 194n, 249n, 265n, 343, 375, 501n insurance companies, 177, 210, 211–12, 360n, 495n, 501n, 518 Intel Corp., 160n intelligent in

7n, 55, 57; and taxes, 50, 63–64; and value, 58. See also type of security Informix Corp, 328–29n InfoSpace, Inc., 323, 428–29n initial public offerings (IPOs), 139, 139n, 140, 140–41n, 142–43n, 150–54, 246, 270n, 312n, 434–35, 435n, 438, 444n, 528n. See also specific company Inktomi Corp., 212–13 Insana, Ron, 342n insider trading, 479n institutional investors, 115, 194, 194n, 249n, 265n, 343, 375, 501n insurance companies, 177, 210, 211–12, 360n, 495n, 501n, 518 Intel Corp., 160n intelligent investors: as businesslike, 523; characteristics of, 13–14; and “controlling the controllable,” 219; ways of being, 101–2 interest, 15, 258, 505n; and aggressive investors, 134, 134n, 135, 136, 140, 146, 147, 160, 173; and bargains, 173; compound, 570; and Cramer’s recommendations, 16; and defensive investors, 89, 93–94, 95, 97, 98, 98n, 99, 99n, 100, 106–7, 106n, 109, 110, 111, 113, 121–22, 364n; and expectations for investors, 22–29, 33; fixed, 211; and history and forecasting of stock market, 70, 76, 77, 78; inflation and, 54, 55; and margin of safety, 515, 515n, 516; and security analysis, 283, 284, 298, 298n, 301, 308; and taxes, 99n, 100, 561, 562. See also specific company or type of security International Business Machines (IBM), 6, 7, 73, 116, 116n, 160, 199, 234, 295–97, 384, 390, 392, 456, 491, 565–67, 578 International Flavors & Fragrances, 458–61, 458n, 470 International Game Technology, 216 International Harvester Co., 289, 295–97, 351, 352, 458–61, 458n, 460n, 470 International Nickel, 289, 311, 351, 352 International Paper Co., 289, 351, 353 International Telephone & Telegraph, 412 Internet: as source of advice, 258n Internet companies, 6n, 14, 15, 40–41, 270n, 337n, 435n, 437n, 508n, 530 investment banks/bankers, 141, 360n, 428–29n; and advice, 257, 268–70; and aggressive investors, 140, 141, 142–43n, 152, 172n; and IPOs, 435n, 437; and reform of Wall Street, 437, 437n; role of, 268–70 Investment Company of America, 230 investment contracts, 219, 225, 529 inv

ational Nickel, 289, 311, 351, 352 International Paper Co., 289, 351, 353 International Telephone & Telegraph, 412 Internet: as source of advice, 258n Internet companies, 6n, 14, 15, 40–41, 270n, 337n, 435n, 437n, 508n, 530 investment banks/bankers, 141, 360n, 428–29n; and advice, 257, 268–70; and aggressive investors, 140, 141, 142–43n, 152, 172n; and IPOs, 435n, 437; and reform of Wall Street, 437, 437n; role of, 268–70 Investment Company of America, 230 investment contracts, 219, 225, 529 investment counseling firms, 20, 28, 29, 258–59, 259n, 260, 270 investment funds: and advertising, 251; advice about, 231; and aggressive investors, 152, 159, 376–78; aim/purpose of, 227, 228, 229; asset elephantiasis of, 246, 251, 252; and balanced fund investments, 241; bank- operated, 4, 235; and “beating the market,” 250–52, 255; changes in, 254; closed end vs. open end, 238–41; closing of, 251, 252; and common stock, 226, 229, 231, 236, 241, 249n; and daring to be different, 250, 252; and defensive investors, 29, 226, 360–61; dividends on, 227, 238; and earnings, 227, 232; expenses/costs of, 227, 227n, 238n, 242, 246, 247, 248, 249, 249n, 250, 251, 252, 253, 253n, 254; Graham’s comments about, 226–41; and growth stocks, 7, 228; and “hot” stocks, 6–7n; and interest, 227; managers of, 4, 229–32, 245–46, 246n, 247, 249, 250, 252, 254; method of sale of, 227; number of, 226; overvalued, speculative investments of, 5; performance of, 229–32, 237, 243–45, 248, 251, 252, 253, 254; price of, 250; questions about, 228; rating of, 252, 252n; registration of, 226, 226n; regulation of, 226, 237; return on, 241, 246, 247, 248, 249, 250, 252, 253, 254, 255; and risk, 232, 233, 237, 246, 247, 251, 252; selection of, 255, 360–61, 376–78; sheepish behavior in, 247; taxes on, 227, 241, 250, 251, 254; time to sell, 254, 256; turnover of stock in, 247; types/classification of, 226, 228; Zweig’s comments about, 242–56. See also closed-end funds; mutual funds “Investment Owner’s Contract,”

e of, 250; questions about, 228; rating of, 252, 252n; registration of, 226, 226n; regulation of, 226, 237; return on, 241, 246, 247, 248, 249, 250, 252, 253, 254, 255; and risk, 232, 233, 237, 246, 247, 251, 252; selection of, 255, 360–61, 376–78; sheepish behavior in, 247; taxes on, 227, 241, 250, 251, 254; time to sell, 254, 256; turnover of stock in, 247; types/classification of, 226, 228; Zweig’s comments about, 242–56. See also closed-end funds; mutual funds “Investment Owner’s Contract,” 219, 225 investment policy statement, 278 investment trusts, 226n investments: conventional and nonconventional, 520; definition of, 519; expectations for, 22–34; “fair-weather,” 521; Graham’s comments about, 18–34, 520–24; Graham’s definition of, 19, 35, 35n, 45; importance of long-term, 565–66; of large sums of money, 543; major change since 1964 in, 22–24; margin of safety as central concept of, 512–24; opportunities for, 521, 532–34; speculation vs., 10, 18–34, 35–46, 519–20; Zweig’s comments about, 35–46. See also specific topic investors: active and passive, 101–2; activism of, 460, 460n; beginning, 128; consistency of, 402; controlling behavior of, 24n, 223, 278, 529, 530; courage of, 524, 535; definition of long- term, 150; discipline of, 24n, 105, 193n, 220, 402; and dividends, 489–96; elderly, 17; emotions of, 8, 14, 19, 102, 193n; and “enhancing shareholder value,” 309; expectations for, 22–34, 25n, 27, 219; functions of, 497–98; Graham’s comments about, 487–96; inflation and, 47–57; as intelligent owners, 499, 501–2; interests of, 499, 508n, 510; investment contract of, 219, 225, 529; ironical situation of, 364n; managers as, 250, 252; and managers/management, 487–96, 497–511, 498n, 502–6; meaning of term, 18–22; measuring success of, 217–20; as mixed aggressive and defensive, 176, 178; and other people’s mistakes, 203, 221, 223; personal situation of, 119–21; predicting behavior of, 24n, 223; investors (cont.) primary cause of failure by, 217n; and proxy m

and, 47–57; as intelligent owners, 499, 501–2; interests of, 499, 508n, 510; investment contract of, 219, 225, 529; ironical situation of, 364n; managers as, 250, 252; and managers/management, 487–96, 497–511, 498n, 502–6; meaning of term, 18–22; measuring success of, 217–20; as mixed aggressive and defensive, 176, 178; and other people’s mistakes, 203, 221, 223; personal situation of, 119–21; predicting behavior of, 24n, 223; investors (cont.) primary cause of failure by, 217n; and proxy materials, 499n, 500–502, 501n; psychology of, 8, 51, 103, 119, 196, 272–73; “reckless,” 19; relationship with company of, 162, 162n, 203; self- defeating behavior of, 12, 15; self-knowledge of, 102; sheep behavior of, 498; speculators distinguished from, 1–2, 10, 18–34, 35–46, 205–6; theory vs. practice regarding, 497–98, 498n; as thinking of self, 215, 217; types of, 6; and whose money is it?, 502–6; Zweig’s comments about, 497–511. See also type of investor Investors Stock Fund, 230 IPOs. See initial public offerings IRA accounts, 64, 111n ITI Corp., 384 J. B. Hunt Transportation, 216 J. P. Morgan Chase, 82 Jackson, Phil, 39 Jacob (Ryan) Internet Fund, 236n Jantzen Inc., 391, 392 “January effect,” 41–42, 46 Janus Global Techology Fund, 243–45 Japan, 61n, 187 JDS Uniphase Corp., 14, 323, 505, 527–28 Jeddo Highland Coal, 543 Jefferson-Pilot, 373 Jesus: Graham’s reference to, 498n Jobs, Steve, 510 Johnny-One-Note Co., 304 Johns Manville Corp., 175n, 289, 351, 353 Johnson & Johnson, 183, 183n, 305, 373 Johnson Controls, 373 Jones, Charles, 128n Jordan, Michael, 83 Jos. A. Bank Clothiers, 216 junior stock issues. See common stock junk bonds, 96, 96n, 108–9, 145–47, 145n, 173n, 251, 420n, 429n, 488n Juno Online Services, 40, 40n “just do what works,” 42–44 Kadlec, Charles, 80 Kahneman, Daniel, 151, 221, 528 Kaplan, G. E., 235–36 Karp, Morris, 450n Kayos, Inc., 447n Kayser-Roth Co., 393, 395 Keck family, 491n Kemper Funds, 81 Keogh accounts, 64 KeyCorp, 373 Keynes, John Maynard,

183n, 305, 373 Johnson Controls, 373 Jones, Charles, 128n Jordan, Michael, 83 Jos. A. Bank Clothiers, 216 junior stock issues. See common stock junk bonds, 96, 96n, 108–9, 145–47, 145n, 173n, 251, 420n, 429n, 488n Juno Online Services, 40, 40n “just do what works,” 42–44 Kadlec, Charles, 80 Kahneman, Daniel, 151, 221, 528 Kaplan, G. E., 235–36 Karp, Morris, 450n Kayos, Inc., 447n Kayser-Roth Co., 393, 395 Keck family, 491n Kemper Funds, 81 Keogh accounts, 64 KeyCorp, 373 Keynes, John Maynard, 133n Kierkegaard, Soren, 180 Kimberly-Clark, 373 King Resources Co., 234 Klingenstein, J. K., 525–26 Knapp, Tom, 542 Kozlowksi, L. Dennis, 442n Kutyna, Donald, 339 Lamont, Owen, 139n Landis, Kevin, 81, 126, 126n Lasus, Jay, 369 lawsuits, 175, 175n Lee, Kate Leary, 180 Leffler, Edward G., 242 Legg Mason Value Trust, 397, 399 Leggett & Platt, 373 Lehman Corp., 241 Lessons for Investors (Graham), 571, 572 letter stocks, 3, 3n, 227, 227n, 236 Leuthold Group, 337n leverage, 294 leveraged buyouts, 32–33n, 429n Levin, Gerald M., 442, 443 LexisNexis, 399 liabilities, 348, 355, 356, 369, 370, 371, 385, 391n, 398. See also specific company Lichtenberg, G. C., 497 life insurance, 89, 118, 361 Lilly (Eli), 373 Linear Technology, 370 Ling-Temco-Vought Inc., 4n, 412, 417, 422, 425–29, 425–26n Lipper, Inc., 248, 253 liquidations, 32, 381 liquidity, 203, 312n LJM Corp., 500–501 load funds, 227 Lockheed Martin, 216 “long run”: how long is, 113n Long-Term Capital Management L.P., 13 Longleaf Partners, 250, 251, 399–400 Loomis, Carol, 181 Lorie, James H., 67n losses, 224, 273, 420, 421; “carrying forward,” 318n; cost of, 526; and Graham’s definition of investment, 35, 35n; importance of avoiding, 12–13; and margin of safety, 516, 518, 525–28, 529, 530; and per-share earnings, 314, 316, 318n; “really dreadful,” 15; and taxes, 561, 562. See also specific company low-multiplier stocks, 387–90, 400, 451, 515–16 Lowe’s Companies, 373 LSI Logic Corp., 370 LTV Corp., 426n Lubin, Melanie Senter,

ers, 250, 251, 399–400 Loomis, Carol, 181 Lorie, James H., 67n losses, 224, 273, 420, 421; “carrying forward,” 318n; cost of, 526; and Graham’s definition of investment, 35, 35n; importance of avoiding, 12–13; and margin of safety, 516, 518, 525–28, 529, 530; and per-share earnings, 314, 316, 318n; “really dreadful,” 15; and taxes, 561, 562. See also specific company low-multiplier stocks, 387–90, 400, 451, 515–16 Lowe’s Companies, 373 LSI Logic Corp., 370 LTV Corp., 426n Lubin, Melanie Senter, 275 Lucent Technologies Inc., 14, 303, 438–40 luck, 243, 396, 525, 533, 535n Lynch, Peter, 15n, 125–26, 250 “mad money” account, 21–22, 46 Mairs & Power Growth Fund, 251 managers/management: compensation for, 306, 316n, 401, 501, 507–8, 509, 509n, 510–11; competence of, 293, 487, 499; and convertible issues and warrants, 411; and daring to be different, 250, 252; and dividends, 341n, 489–92; efficiency of, 499, 503;functions of, 508n; Graham’s comments about, 487–96; and interests of investors, 499, 508n, 510; of investment funds, 229–32, 245–46, 246n, 247, 249, 250, 251, 252, 254, 290n; investors’s relations with, 487–96, 497–511, 498n; and market fluctuations, 206–7; migrating, 245–46; misbehavior of, 14, 497; and per-share earnings, 315–16, 322; poor, 488; as promoters, 307; and repurchase plans, 506–9; reputation of, 251; and security analysis, 293, 302, 305–7, 309; as shareholders, 250, 252; stock options for, 322, 507–8, 507n, 509, 509n, 510–11; and stock selection for aggressive investors, 379, 399–400, 401, 402; wealth of, 341n; and whose money is it?, 502–6 Manhattan Fund, Inc., 233–35 margin accounts, 21–22, 21n, 47n, 193, 267 margin of safety, 10, 296, 301, 349, 371, 399, 401, 512–31, 515n, 519n, 537, 547, 571, 574 Marsh, Paul, 113n Massachusetts Investment Trust, 230 mathematics, 569–70 Mattel Inc., 234, 303 Maxim Integrated Products, 370 Maxwell Motors Co., 293 May Department Stores, 373 McCormick Harvesting Machine Co., 458n McDonald’s Corp., 373 McGraw Edison

ve investors, 379, 399–400, 401, 402; wealth of, 341n; and whose money is it?, 502–6 Manhattan Fund, Inc., 233–35 margin accounts, 21–22, 21n, 47n, 193, 267 margin of safety, 10, 296, 301, 349, 371, 399, 401, 512–31, 515n, 519n, 537, 547, 571, 574 Marsh, Paul, 113n Massachusetts Investment Trust, 230 mathematics, 569–70 Mattel Inc., 234, 303 Maxim Integrated Products, 370 Maxwell Motors Co., 293 May Department Stores, 373 McCormick Harvesting Machine Co., 458n McDonald’s Corp., 373 McGraw Edison, 461–62, 461n, 470 McGraw-Hill, Inc., 135, 373, 461–62, 461n, 470, 471, 472 Merck & Co., 373 Mergenthaler Linotype Enterprises, 330 mergers and acquisitions: and aggressive investors, 173, 174, 381, 389n, 393, 393n, 401; and case histories, 422, 424, 424n, 426, 426n, 438, 440–43, 441n; and defensive investors, 374; and dividends, 505, 505n; and investments vs. speculation, 32, 33n; and per-share earnings, 323; and security analysis, 303, 303n; serial, 474n; stock vs. cash in, 505n Merrill Lynch & Co., 266n, 405n, 406n, 410n, 443 Micron Technology, 326–27 Microsoft, 115n, 116n, 150, 151, 162n, 185, 247, 505, 505n MicroStrategy, 368, 369 Miller, Merton, 494n Miller, William, 397, 399 Minkow, Barry, 433–34n Minnie Pearl’s Chicken System Inc., 463, 466 Mobil Corp., 491n Modigliani, Franco, 494n Money Magazine, 45, 255, 368, 530 “money managers,” 235–36, 237, 360n, 400, 501n money-market funds, 107, 108–9 “Moneyline” (CNN program), 81 monopolies, 304, 356, 401 Montaigne, Michel de, 272 Monument Internet Fund, 15, 15–16n, 243–45 Moody’s Investment Service, 95, 260, 501n Morey, Matthew, 252n Morgan Fun-Shares, 253 Morgan Guaranty Bank, 235n Morgan Stanley, 39, 115n, 371, 374–75 Morgan, J. P., 54, 54n Morningstar: ratings by, 252; website for, 129n, 148n, 157n, 159n, 183, 186, 227n, 252n, 374n, 375, 397, 420n mortgages, 108–9, 110, 173, 360–61, 360n Motorola, 81 Mr. Market parable, 204–5, 212–25, 380n, 531 Mr. Tax of America, 433n, 434 Mulford, Charles, 329 Munger, Charles, 4

2 Monument Internet Fund, 15, 15–16n, 243–45 Moody’s Investment Service, 95, 260, 501n Morey, Matthew, 252n Morgan Fun-Shares, 253 Morgan Guaranty Bank, 235n Morgan Stanley, 39, 115n, 371, 374–75 Morgan, J. P., 54, 54n Morningstar: ratings by, 252; website for, 129n, 148n, 157n, 159n, 183, 186, 227n, 252n, 374n, 375, 397, 420n mortgages, 108–9, 110, 173, 360–61, 360n Motorola, 81 Mr. Market parable, 204–5, 212–25, 380n, 531 Mr. Tax of America, 433n, 434 Mulford, Charles, 329 Munger, Charles, 401, 544, 554–55 municipal bonds, 24, 259, 520; and aggressive investors, 134n, 155; and defensive investors, 92, 95, 106, 106n, 108–9; fluctuations in price of, 208, 210; and investment funds, 251, 253 Murray, Nick, 278 mutual funds: and aggressive investors, 141n, 145, 145n, 147, 148, 158n, 159n, 187, 377, 377n, 379n; as almost perfect, 242; and “buy what you know” picking, 127; characteristics of, 242; closed-end funds vs. open-end, 238–41; closing of, 237–38n; and convertible issues and warrants, 420; and corporate bonds, 283n; decline in funds invested in, 17; and defensive investors, 28, 28n, 89, 96n, 105, 128, 128n, 129–30, 354n, 356n, 360–61, 369; expenses/costs of, 128n, 219, 242, 376–77, 377n; “focused” portfolios of, 290n; foreign stocks and bonds in, 148, 187; and formula trading, 44; and growth stocks, 158n, 159n, 161; and inflation, 64; introduction of, 242; for junk bonds, 145n, 147; managers of, 290n; and market fluctuations, 6–7n, 7, 218; and new offerings, 141n; performance of, 229–32, 242, 245n, 377, 377n; precious metals, 56n; and public attitude about stocks, 20n; registration of, 226, 226n; as “regulated investment company” (RIC), 227–28n; return on, 253, 290n; and secondary companies, 172n; and security analysis, 290n; small-cap, 369; and speculation, 5, 37; and “sure things,” 15, 15–16n; taxes on, 227–28n, 242, 562–63; types of, 226–27, 227n. See also investment funds; specific fund Mutual Series Funds, 396 name brands, 392, 401 NASDAQ, 38, 81, 149

mance of, 229–32, 242, 245n, 377, 377n; precious metals, 56n; and public attitude about stocks, 20n; registration of, 226, 226n; as “regulated investment company” (RIC), 227–28n; return on, 253, 290n; and secondary companies, 172n; and security analysis, 290n; small-cap, 369; and speculation, 5, 37; and “sure things,” 15, 15–16n; taxes on, 227–28n, 242, 562–63; types of, 226–27, 227n. See also investment funds; specific fund Mutual Series Funds, 396 name brands, 392, 401 NASDAQ, 38, 81, 149n, 152, 186, 190n, 217n, 359, 406n, 414n National Biscuit Co., 393 National Cash Register, 234 National General Corp., 4n, 412, 415, 463–66, 466n, 470, 472 National Investors Fund, 230 National Presto Industries, 168, 391, 393, 463–66, 466n, 470, 514 National Student Marketing Corp., 234, 235n, 481n Navistar, 458n, 460n Neff, John, 228n Nelson, F. Barry, 419 net asset value. See book value net current assets. See working capital neuroscience of investing, 220–23 New Community debentures, 95, 96, 155 New Haven Railroad, 286 New Housing Authority, 96, 96n, 155 new offerings, 172, 253n, 405; and advice, 268–69; and aggressive investors, 134, 139–44, 172, 174–75, 176–77, 392; and case histories, 433–37; of common stock, 139n, 141–44, 269; and defensive investors, 176; and investments vs. speculation, 28; and market fluctuations, 193; and per-share earnings, 312n; and role of investment bankers, 268–69. See also initial public offerings New York Central Railroad, 424n New York Edison Co., 567–68 New York Institute of Finance, 473 New York Stock Exchange (NYSE): advice from members of, 261, 264, 267, 270, 271; bankruptcy of firms registered with, 266; and bargains, 186; closing bell on, 35; comparison of four companies listed on, 330–38; and comparison of securities, 1; and convertible issues and warrants, 413n; costs of trading stocks on, 149n; “customers’ brokers” as registerd with, 264; and dealings with brokerage houses, 138, 139, 266, 267; and dividends, 493, 493n, 494n; fee

567–68 New York Institute of Finance, 473 New York Stock Exchange (NYSE): advice from members of, 261, 264, 267, 270, 271; bankruptcy of firms registered with, 266; and bargains, 186; closing bell on, 35; comparison of four companies listed on, 330–38; and comparison of securities, 1; and convertible issues and warrants, 413n; costs of trading stocks on, 149n; “customers’ brokers” as registerd with, 264; and dealings with brokerage houses, 138, 139, 266, 267; and dividends, 493, 493n, 494n; fees for stock listed on, 128n; highest-price stock on, 491n; and per-share earnings, 315; and portfolio policy for aggressive investors, 186; and stock selection for aggressive investors, 202, 377, 377n; and stock selection for defensive investors, 356; and stock splits, 493, 493n; turnover of stock on, 37, 266–67; and World War I, 10 New York Trap Rock Co., 543 Newman, Jerome, 532–33, 532–33n Newman, Paul, 447n news, stockmarket, 221–23, 223n Newton, Isaac, 13–14, 15 Niagara-Mohawk Power Co., 357 “Nifty Fifty” stocks, 336–37n Nissim, Doron, 506, 506n Nixon, Richard M., 50n no-load funds, 227, 227n, 239 Nokia, 81 nonconvertible bonds, 98–99, 134 Norfolk & Western, 425 Norfolk Southern Railroad, 217n, 362n, 425n Norsk Hydro, 250 Nortek, Inc., 483–84 Nortel Networks, 184, 483–84 Northern Pacific Railway, 168, 207–8, 209 Northwest Industries Inc., 317–18, 317n, 412 Norway bonds, 138 Novellus Systems, 370 Nucor Corp., 373 NVF Corp., 411, 422, 429–33, 429n, 433n, 576–77 Nygren, William, 397, 399 Oakmark Fund, 251, 397, 399 Odean, Terrance, 149, 150n, 151 oil companies, 291, 291n, 292 online message boards, 502 online trading, 38–39, 128, 272, 344, 345 open-end funds, 116, 237–38n, 238–41. See also mutual funds OPM (Other People’s Money), 303, 303–4n opportunities: recognizing, 532–34, 535n options, call, 421 options, stock, 3, 3n, 306, 308, 316n, 322, 323, 398, 400, 421, 507–11, 507n, 509n, 522n. See also warrants; specific company Oracle Corp., 505, 508–9 Orbitex Emerging Tech

397, 399 Oakmark Fund, 251, 397, 399 Odean, Terrance, 149, 150n, 151 oil companies, 291, 291n, 292 online message boards, 502 online trading, 38–39, 128, 272, 344, 345 open-end funds, 116, 237–38n, 238–41. See also mutual funds OPM (Other People’s Money), 303, 303–4n opportunities: recognizing, 532–34, 535n options, call, 421 options, stock, 3, 3n, 306, 308, 316n, 322, 323, 398, 400, 421, 507–11, 507n, 509n, 522n. See also warrants; specific company Oracle Corp., 505, 508–9 Orbitex Emerging Technology Fund, 16n, 244 orders: execution of, 267–68 O’Shaughnessy, James, 42–44, 44n, 45 overvaluation, 5, 14, 81, 172, 246, 261, 505; and aggressive investors, 163, 172, 382; “gambler’s fallacy” about, 458n; and repurchase plans, 508n, 509. See also specific company Owens-Illinois Glass Co., 289, 351, 353 owner earnings, 308, 398, 399 owners: intelligent, 499, 501–2 P/E ratio. See price/earnings ratio Pacific Gas & Electric Co., 357 Pacific Partners, Ltd., 556 PacTel, 327 PaineWebber, 41, 83 Palm, Inc., 479–80 Panhandle Eastern Pipe Line Co., 357 Parker Pen Co., 391, 392 Pascal, Blaise, 35, 392, 529–31 “Pascal’s wager,” 392n, 529–31 patents and trademarks, 374 PBHG Technology & Communications Fund, 243–45 Penn Central Railroad, 4n, 94, 286, 362, 384, 422, 423–25, 423n, 424n, 425n, 466n, 564–65 Pennsylvania Electric Co., 424 pension funds, 84, 194, 194n, 308, 316n, 327–28, 398, 429n, 501n, 545–46. See also specific company Peoples Gas Co., 357 PepsiCo Inc., 373, 477 per-share earnings: and aggressive investors, 398; and common stock, 318, 320; and convertible issues and warrants, 316, 318, 411, 414, 416; and defensive investors, 338, 348, 351; and dividends, 492; Graham’s comments about, 310–21; and margin of safety, 514n; and repurchase plans, 506–7, 508; Zweig’s comments, 322–29. See also specific company performance: and advice, 275; and aggressive investors, 172n, 376–78, 377n, 379n, 388; and defensive investors, 348, 356; factors influencing, 85; and Graham’s definition

: and aggressive investors, 398; and common stock, 318, 320; and convertible issues and warrants, 316, 318, 411, 414, 416; and defensive investors, 338, 348, 351; and dividends, 492; Graham’s comments about, 310–21; and margin of safety, 514n; and repurchase plans, 506–7, 508; Zweig’s comments, 322–29. See also specific company performance: and advice, 275; and aggressive investors, 172n, 376–78, 377n, 379n, 388; and defensive investors, 348, 356; factors influencing, 85; and Graham’s definition of investment, 35, 35n; of growth stocks, 451–52n; and market fluctuations, 203; and per-share earnings, 321; of secondary companies, 172n; and security analysis, 291n, 292, 293n, 299–301; of value stocks, 451–52n; vogue of, 4. See also “beating the market/average”; specific company or type of security performance funds, 228, 228n, 232–37 Performance Systems Inc., 463 Perimeter (Stan) Investments, 545, 557 periodicals: as source of advice, 257–58, 258n Perot, H. Ross, 266n Petersburg Paradox, 570 Pfizer, Inc., 167n, 247, 373 Philadelphia Electric Co., 357 Philip Morris, 175n Pickens, T. Boone, 488n Piecyk, Walter, 41 Pier 1 Imports, 216 Pimco, 110 Pinault-Printemps-Redoute Group, 469n Plato, 251 Plexus Group, 42, 149n Polaroid, 234, 392 portfolio: for aggressive investors, 101, 133–44, 145–54, 155–78, 179–87, 376–95; autopilot, 128–29, 130–32, 223; basic characteristics of, 89; changes to, 117; chaotic, 273; as combination of active and passive ways of investing, 102; and common stocks, 112–23, 124–32; for defensive investors, 89–100, 101–11, 112–23, 124–32, 337–38, 347–66; Graham’s concept of appropriate individual, 18–34; inflation and, 47–57; “laddered,” 106n; market fluctuations and, 195–97; negative approach to development of, 133–44, 145–54; 100– stock, 105; overview about, 1–11; own corporation stock in, 126–27; positive approach to development of, 155–78, 179–87; rebalancing of, 104–5, 180n, 197, 219; vodka-and-burrito, 148. See also asset allocation; selectio

stocks, 112–23, 124–32; for defensive investors, 89–100, 101–11, 112–23, 124–32, 337–38, 347–66; Graham’s concept of appropriate individual, 18–34; inflation and, 47–57; “laddered,” 106n; market fluctuations and, 195–97; negative approach to development of, 133–44, 145–54; 100– stock, 105; overview about, 1–11; own corporation stock in, 126–27; positive approach to development of, 155–78, 179–87; rebalancing of, 104–5, 180n, 197, 219; vodka-and-burrito, 148. See also asset allocation; selection, stock portfolio trackers, 117n, 397 Posner, Victor, 429n PPG Industries, 373 “pre-emptive right,” 414 precious metals, 55, 55–56n predictions. See forecasting preferred stock: and aggressive investors, 98, 133, 134–37, 134n, 139, 140, 142, 166, 173, 176–77, 381; and balanced funds, 241; and bargains, 166, 173; and convertible issues and warrants, 404, 405, 406, 406n, 412, 415, 417; and defensive investors, 89, 98–99, 100, 108–9, 111, 121, 176, 365; dividends on, 98–99, 99n, 134n, 285n, 323, 404, 516; and Graham’s business principles, 523; and inflation, 48; and investment funds, 241; and margin of safety, 512, 513, 516, 520; and new offerings, 140, 142, 405; and per-share earnings, 318, 323; price fluctuations in, 210–11; price record of, 405, 406; ratings for, 210; recommended “coverage” for, 284; and risk, 283–87; and security analysis, 281, 283–87, 293–94, 308; as senior stock issues, 285n; switches between common and, 411–13; yield on, 573. See also specific company price: and advice, 261; and bankruptcy, 423n; Buffet’s comments about, 540–41; calculation of true market, 416; and comparison of four listed companies, 330–38, 334n, 337n; and convertible issues and warrants, 405, 406, 415, 416; decline in common stock, 3; of price (cont.) delisted stocks, 385n; and dividends, 490, 491, 494n; and earnings, 115–16, 318n; and expectations for investors, 24, 24n, 31, 32; “gambler’s fallacy” about, 458n; and history and forecasting of stock market, 65, 69, 70, 71, 73, 74,

dvice, 261; and bankruptcy, 423n; Buffet’s comments about, 540–41; calculation of true market, 416; and comparison of four listed companies, 330–38, 334n, 337n; and convertible issues and warrants, 405, 406, 415, 416; decline in common stock, 3; of price (cont.) delisted stocks, 385n; and dividends, 490, 491, 494n; and earnings, 115–16, 318n; and expectations for investors, 24, 24n, 31, 32; “gambler’s fallacy” about, 458n; and history and forecasting of stock market, 65, 69, 70, 71, 73, 74, 77, 78, 81, 83, 84, 84n, 85, 334; and inflation, 61, 62; and investment funds, 238, 239, 241, 250; and investor- management relations, 487, 488; and margin of safety, 513, 515n, 516, 517–18, 521, 521n, 522, 522n; and market fluctuations, 17, 23–24, 189–92, 207–12; and mispricing of stock, 212–13, 363n; and new offerings, 140, 142, 143–44; and portfolio policy for aggressive investors, 4, 133–44, 136n, 158, 159, 163, 165–69, 171, 172, 174–78, 181, 183; and portfolio policy for defensive investors, 97, 111–16, 113–14n, 122, 124, 176; and repurchase plans, 507, 507n, 508n; and risk, 17, 122; and security analysis, 302–9; and speculation, 572; of stock options, 306; and stock selection for aggressive investors, 378, 382–83, 384, 386, 388, 389, 390, 391; and stock selection for defensive investors, 338, 347, 348, 349, 350, 350n, 351, 354, 355, 356, 359, 363, 363n, 364, 365, 374–75; and timing, 189–92; unpredictability of, 24, 24n; and value, 10, 32, 36, 39n, 40, 122, 206, 521, 522, 541; wholesale, 76, 77. See also appreciation; bargains; fluctuations, market; inflation; price/earnings ratio; specific company price-and-wage freeze, 50n price/earnings ratio: and advice, 264n; and bargains, 168; calculation of, 159–60n, 374, 374n; and convertible issues and warrants, 416; definition of, 70n; forward, 374; Graham’s criticisms of high, 476, 476n; and growth stocks, 159; and history and forecasting of stock market, 70, 71, 76, 78; and investments vs. speculation, 37; and margin of sa

olesale, 76, 77. See also appreciation; bargains; fluctuations, market; inflation; price/earnings ratio; specific company price-and-wage freeze, 50n price/earnings ratio: and advice, 264n; and bargains, 168; calculation of, 159–60n, 374, 374n; and convertible issues and warrants, 416; definition of, 70n; forward, 374; Graham’s criticisms of high, 476, 476n; and growth stocks, 159; and history and forecasting of stock market, 70, 71, 76, 78; and investments vs. speculation, 37; and margin of safety, 514n; and market fluctuations, 193, 200, 202; and per-share earnings, 321; and portfolio policy for aggressive investors, 159, 159–60n, 168, 181, 182, 183; and portfolio policy for defensive investors, 115, 116, 117n; and security analysis, 291, 292, 295, 296; and stock selection for aggressive investors, 382–83, 384, 385, 399; and stock selection for defensive investors, 338, 349, 350, 350n, 352–53, 354, 355, 359, 374, 375. See also specific company price-to-assets ratio, 349 price-to-book value ratio, 374–75 Priceline.com, 504–5 primary stock issues, 123 pro forma (“as if”) statements, 307, 316n, 322–23, 411, 424n, 431 Procter & Gamble, 289, 305, 351, 373 profitability, 333, 453n. See also specific measure of profitability profitable reinvestment theory, 489–92, 490n, 492, 493, 494 ProFunds Ultra OTC Fund, 243–45 ProQuest, 399 prospectus, 252, 437 Providence Bank, 384n proxy materials, 499n, 500–502, 501n, 510–11 Public Service Commission, 568 Public Service Electric & Gas Co., 357 public utilities: and aggressive investors, 175, 383n, 389; and bonds, 286–87; debt of, 348; as defensive investment, 354, 356–60; and defensive investors, 122, 348, 354, 354n, 356–60, 356n, 362; dividends of, 493, 495–96; and inflation, 54; and investments vs. speculation, 27; and market fluctuations, 9, 200; regulation of, 286n; and security analysis, 284, 285, 286–87, 300, 304; and selection of stock, 348, 354, 354n, 356–60, 356n, 362, 383n, 389; and subscription rights, 495–96 Publ

357 public utilities: and aggressive investors, 175, 383n, 389; and bonds, 286–87; debt of, 348; as defensive investment, 354, 356–60; and defensive investors, 122, 348, 354, 354n, 356–60, 356n, 362; dividends of, 493, 495–96; and inflation, 54; and investments vs. speculation, 27; and market fluctuations, 9, 200; regulation of, 286n; and security analysis, 284, 285, 286–87, 300, 304; and selection of stock, 348, 354, 354n, 356–60, 356n, 362, 383n, 389; and subscription rights, 495–96 Public Utility Holding Company Act (1935), 286n Puma Technology, 38 Purex Co., 494 Putnam Growth Fund, 230 QLogic Corp., 370 Quaker Oats, 303 Qualcomm Inc., 14, 41, 41n, 370 quicken.com, 157n, 354n, 375 “quotational” value/loss, 20, 36 quotations, market, 198–99, 203, 204, 205, 206, 221, 222, 223 Qwest Communications, 323–24, 324n radio companies, 82 railroads, 82, 361, 423; and aggressive investors, 136, 173, 173n, 174–75; bankruptcy of, 4, 4n, 362, 384, 423n; and bargains, 173, 173n; bonds of, 172, 173, 173n, 174–75, 284, 285, 286, 287, 423, 424, 512; and defensive investors, 100, 122, 359, 361–62, 362n; and market fluctuations, 4, 4n; and security analysis, 284, 285, 286, 287; and speculation, 570–71. See also specific railroad Randell, Cort, 235n Rapid American, 412 Raskob, John J., 1–2, 2n, 534 rating: of bonds, 95, 210, 211, 283n, 350n; of investment funds, 252, 252n rating agencies, 501n Reagan, Ronald, 274 real estate, 56, 63, 63n, 203, 360n, 414, 415n, 521 Real Estate Investment Trust Company, 446–50, 470 Real Estate Investment Trusts (REITs), 63, 63n, 360n Realty Equities Corp. of New York, 446–50, 447n, 450n, 470 rebalancing, 104–5, 180n, 197, 219 Red Hat, Inc., 484–85, 484n, 485n Regions Financial, 373 reinvestment, 172, 179n, 253n; and defensive investors, 113, 113n, 128, 356n; and dividends, 489–92, 490n, 492, 493, 494; and margin of safety, 515, 516; and portfolio for aggressive investors, 145n, 172, 179n REITs. See Real Estate Investment Trusts repurchase plans,

Trust Company, 446–50, 470 Real Estate Investment Trusts (REITs), 63, 63n, 360n Realty Equities Corp. of New York, 446–50, 447n, 450n, 470 rebalancing, 104–5, 180n, 197, 219 Red Hat, Inc., 484–85, 484n, 485n Regions Financial, 373 reinvestment, 172, 179n, 253n; and defensive investors, 113, 113n, 128, 356n; and dividends, 489–92, 490n, 492, 493, 494; and margin of safety, 515, 516; and portfolio for aggressive investors, 145n, 172, 179n REITs. See Real Estate Investment Trusts repurchase plans, 309, 316n, 506–9, 507n, 508n, 509n, 511 research, 126, 128, 159n, 243, 246, 265n, 272, 363n, 367, 376–77, 379n research and development (R&D), 305, 316, 440 restructuring charges, 428, 428n retail bonds, 284 retirement plans, 126–27, 273. See also pension plans; specific plan Retirement Systems of Alabama, 146 return: and advice, 272, 275, 277; aggregate, 27; for aggressive investors, 29–34, 89, 135, 174, 182, 377, 381, 393; average annual, 25n, 34, 112n; average expected, 83, 84; for defensive investors, 22–29, 25n, 89, 91, 92, 96, 111, 112n, 113, 113n, 121, 122, 176, 368; and Graham’s return (cont.) business principles, 523; Graham’s comments about, 18–34; and Graham’s definition of investment, 35n; and history and forecasting of stock market, 67, 78, 80–87; and inflation, 50, 54, 62; and investment vs. speculation, 18, 19–20n; measures of, 453n; and public attitude about stocks, 19–20n; on Raskob’s prescription, 2; and risk, 89; and security analysis, 290n; Zweig’s comments about, 35–46. See also dividends; interest; performance; return on invested capital (ROIC); yield; specific company or type of security return on invested capital (ROIC), 398, 399 revenue bonds, 94 Riley, Pat, 101 risk: and advice, 264n; and aggressive investors, 32, 133n, 134n, 136–37, 145, 146, 159n, 160, 163, 174–75, 377, 392–93; Buffett’s comments about, 546–47; and defensive investors, 89, 96n, 102–4, 106n, 107, 110, 112, 114, 114n, 116, 121–22, 124, 125, 367; and factors that characterize go

out, 35–46. See also dividends; interest; performance; return on invested capital (ROIC); yield; specific company or type of security return on invested capital (ROIC), 398, 399 revenue bonds, 94 Riley, Pat, 101 risk: and advice, 264n; and aggressive investors, 32, 133n, 134n, 136–37, 145, 146, 159n, 160, 163, 174–75, 377, 392–93; Buffett’s comments about, 546–47; and defensive investors, 89, 96n, 102–4, 106n, 107, 110, 112, 114, 114n, 116, 121–22, 124, 125, 367; and factors that characterize good decisions, 528–29; foolish, 12; and formula trading, 44, 45; and Graham’s business principles, 523; and history and forecasting of stock market, 80–81; and inflation, 47n, 55, 57; and investment vs. speculation, 20–21, 21n; managing of, 12–13, 535, 535n; and margin of safety, 515, 516, 521–22n, 522, 525–26, 528–29; and market fluctuations, 188, 219; and price, 17, 122; and return/reward, 89, 546–47; and security analysis, 283–87; and short selling, 458n; and speculation, 571; and value, 122; what is, 525–26; Zweig’s comments about, 535. See also specific company or type of security Risk Management Association, 501n Ritter, Jay, 150 Roche Pharmaceutical Co., 410n Rockefeller family, 185 Rodriguez, Robert, 397, 400 Rogers, Will, 368 Rohm & Haas, 373 Rosen, Jan M., 224n Ross, Robert M., 97 DEL Roth, John, 184 Rothschild, Nathan Mayer, 179 Rothschild family, 33, 33n roulette, 518–19, 519n Rouse Corp., 234 Rowan Companies, 370 Royce, Charles, 369, 400 Ruane, Bill, 543, 544, 545 Ruettgers, Michael, 342n “Rule of 72,” 115n, 298n “rule of opposites,” 208, 208n “safety of principle,” 18, 35, 45 safety tests: for bonds, 283–87 San Francisco Real Estate Investors, 447n Sanford C. Bernstein & Co., 38n, 181 Santa Fe Industries, 384 Santayana, George, 1 savings accounts, 24, 55, 75, 97 savings and loan associations, 360–61, 360n savings banks, 89, 97 savings bonds, 24, 108–10, 211 Saxon Industries, 234 Saylor, Michael, 369 SBC Communications, 46, 84, 327 Schilit, Howard, 329 Schloss,

rs, Michael, 342n “Rule of 72,” 115n, 298n “rule of opposites,” 208, 208n “safety of principle,” 18, 35, 45 safety tests: for bonds, 283–87 San Francisco Real Estate Investors, 447n Sanford C. Bernstein & Co., 38n, 181 Santa Fe Industries, 384 Santayana, George, 1 savings accounts, 24, 55, 75, 97 savings and loan associations, 360–61, 360n savings banks, 89, 97 savings bonds, 24, 108–10, 211 Saxon Industries, 234 Saylor, Michael, 369 SBC Communications, 46, 84, 327 Schilit, Howard, 329 Schloss, Walter J., 541–42, 543–44, 545, 549–50 Schow, Howard, 400 Schultz, Paul, 139n Schwab (Charles A.) Corp., 107 Schweber, Mark, 64 Schwert, William, 42, 42n, 150 Scientific-Atlanta, 370 Scudder, Stevens & Clark, 260 Sears Roebuck Co., 289, 319, 320, 351, 353 SEC. See Securities and Exchange Commission secondary companies, 5, 123, 170–73, 172n, 176–78, 196, 196n, 294, 383–84, 520 securities: delivery and receipt of, 267–68, 267–68n Securities & Exchange Commission (SEC): and advice, 274; and AOL-Time Warner case, 443; and defensive investor, 128; and GEICO, 533n; and hedge funds, 382n; and investment funds, 226, 226n, 227n, 228n, 236, 250; and IPOs, 437; and letter-stocks, 3n; and mutual funds, 116; and new issues, 392; and NVF- Sharon Steel case, 429n; and per-share earnings, 324n, 328–29n; and Realty Equities case, 450n; regulation of brokerage houses by, 266; regulation of public utilities by, 286n; and repurchase plans, 508n; and security analysis, 286–87, 286n; and stock selection for defensive investors, 369; and Tyco case, 441n; website for, 186, 250, 274, 303, 306–7, 324n, 375, 399, 438n, 510n Securities Industry Association, 17, 258n Securities Investor Protection Corp. (SIPC), 268 security analysis, 330–38; and advice, 260; for aggressive investors, 303n, 376–95; and capital structure, 302, 308–9; and capitalization, 288; characteristics of, 282–83; and comparison of four listed companies, 330–38, 339–46; concept of, 280–301; for defensive investors, 294–95, 347–

n for defensive investors, 369; and Tyco case, 441n; website for, 186, 250, 274, 303, 306–7, 324n, 375, 399, 438n, 510n Securities Industry Association, 17, 258n Securities Investor Protection Corp. (SIPC), 268 security analysis, 330–38; and advice, 260; for aggressive investors, 303n, 376–95; and capital structure, 302, 308–9; and capitalization, 288; characteristics of, 282–83; and comparison of four listed companies, 330–38, 339–46; concept of, 280–301; for defensive investors, 294–95, 347–66; and dividends, 302; and financial strength, 302, 308–9; and forecasting, 281, 282n, 288–89, 291n, 293n, 298, 299; and general long-term prospects, 302; and growth stocks, 281, 282, 295–98; and management, 302; and per- share earnings, 310–21; prediction/qualitative approach to, 364, 364n, 365; and price, 302–9; protection/quantitative approach to, 364, 364n, 365; and risk, 283–87; and speculation in common stocks, 572; techniques for, 281, 282, 282n; and two-part appraisal process, 321; and valuation, 281–82; Zweig’s comments about, 302–9, 339–46. See also case histories; financial analysts; per-share earnings; selection, stock; type of security Security Analysis (Graham and Dodd), 18, 35n, 283, 423, 484n, 499n, 508n, 514n, 537, 548, 564 security analyst. See financial analysts selection, stock: and adoption of schemes by large numbers of people, 195n; and advice, 272; for aggressive investors, 30–31, 376–95; and bargain issues, 390–93; and “best” stocks in DJIA, 363; and bridge player analogy, 378–79; “buy what you know,” 125–27, 126n; criteria for, 337–38, 348–66, 385–86; for defensive investors, 337–38, 347–75, 385n; do it yourself, 128–29; Graham-Newman methods for, 380–83; Graham’s selection, stock (cont.) comments about, 349–50, 376–95; Graham’s criteria for, 369, 371, 374–75; “human factor” in, 365; for long- and short-term, 30, 31; and low- multiplier industrial stocks, 387–90; and market fluctuations, 200, 206; “pick the winners,” 76; and practicing selectin

ayer analogy, 378–79; “buy what you know,” 125–27, 126n; criteria for, 337–38, 348–66, 385–86; for defensive investors, 337–38, 347–75, 385n; do it yourself, 128–29; Graham-Newman methods for, 380–83; Graham’s selection, stock (cont.) comments about, 349–50, 376–95; Graham’s criteria for, 369, 371, 374–75; “human factor” in, 365; for long- and short-term, 30, 31; and low- multiplier industrial stocks, 387–90; and market fluctuations, 200, 206; “pick the winners,” 76; and practicing selecting stocks, 396–97; prediction/qualitative approach to, 364, 364n, 365; protection/quantitative approach to, 347–48, 364, 364n, 365; rules for common stock, 114–15, 117; and secondary companies, 383–84; single criteria for, 387–90; and special situations, 393–95; and stock- picking “systems,” 37; Zweig’s comments about, 367–75. See also asset allocation; diversification; security analysis Sequoia Fund, 254, 254n, 543, 553 shareholders. See Investors Sharon Steel Co., 411, 429–33, 429n, 576–77 sheepish behavior, 247, 498 Shiller, Robert, 85–86 shorting, 19, 30, 32, 32n, 381n, 458n Siebel Systems, 370 Siegel, Jeremy, 2n, 47n, 80, 82, 85n, 475 Siegel, Laurence, 60n Sigma-Aldrich, 373 Sing, Jeanette, 478 size of enterprise, 337, 348, 349, 350, 369, 386, 388, 389, 390, 499 Slovic, Paul, 529 Small Business Administration, 447 small-cap stocks, 252, 369 Smith, Adam, 541–42 South Sea Co., 13 Southern California Edison, 357 Southern New England Telephone, 327 Southwest Airlines, 368 Spalding United Kingdom, 315 special charges, 311, 312–14, 315, 316, 317, 319, 320, 416, 424. See also specific company “Special Purpose Entities,” 316–17n special situations. See “workouts” speculation: and advice, 260, 262–63, 268, 269, 563; and aggressive investors, 141n, 143, 160, 165, 171, 175, 392; and bargains, 171; benefits of, 21n; and case histories, 433–37; and convertible issues and warrants, 406, 409; and defensive investors, 89, 112, 115, 116, 119, 128; and dividends, 489, 490; expectations f

ited Kingdom, 315 special charges, 311, 312–14, 315, 316, 317, 319, 320, 416, 424. See also specific company “Special Purpose Entities,” 316–17n special situations. See “workouts” speculation: and advice, 260, 262–63, 268, 269, 563; and aggressive investors, 141n, 143, 160, 165, 171, 175, 392; and bargains, 171; benefits of, 21n; and case histories, 433–37; and convertible issues and warrants, 406, 409; and defensive investors, 89, 112, 115, 116, 119, 128; and dividends, 489, 490; expectations from, 24–34; Graham’s comments about, 18–34, 563–64; and history and forecasting of stock market, 74, 85, 87; and inflation, 47; intelligent, 21; investing distinguished from, 1–2, 10, 18–34, 35–46, 205–6, 519–20; and investment funds, 5, 229, 232, 233, 237; and margin of safety, 519–20, 521, 522n; and market fluctuations, 5, 188, 189, 190–91, 193, 199; and new offerings, 141n, 143, 392; and problems of brokerage houses, 267; and Raskob’s prescription, 2; and role of investment bankers, 268; and security analysis, 294; Zweig’s comments about, 35–46 Spinoza, Baruch, 195 splits, stock, 309, 344, 491, 492–96, 493n Sprint Corp., 497, 509 stability, 178, 348, 349, 371, 386. See also volatility stagflation, 59 stamps, rare, 56 Standard & Poor’s: and advice, 260; and bargains, 169, 171; bond ratings by, 95, 423; and convertible issues and warrants, 403, 406n, 408n, 419; and dividends, 294n; and expectations for investors, 27n, 28, 28n; and Graham’s disciples, 537–38, 543, 544, 546; and history and forecasting of stock market, 65–72, 76, 77, 84, 85; and inflation, 50; and investment funds, 231, 231n, 233, 235, 237, 239, 250, 254, 255; and investment vs. speculation, 37; listing of constituent companies in, 250, 333; and market fluctuations, 190n, 192–94, 209, 212, 218; and May 1970 debacle, 463n; and mutual funds, 230, 290n; and portfolio for aggressive investors, 158, 161, 169, 171; and portfolio for defensive investors, 111, 112n, 115n, 131, 131n, 132; and price/earnings ratio,

story and forecasting of stock market, 65–72, 76, 77, 84, 85; and inflation, 50; and investment funds, 231, 231n, 233, 235, 237, 239, 250, 254, 255; and investment vs. speculation, 37; listing of constituent companies in, 250, 333; and market fluctuations, 190n, 192–94, 209, 212, 218; and May 1970 debacle, 463n; and mutual funds, 230, 290n; and portfolio for aggressive investors, 158, 161, 169, 171; and portfolio for defensive investors, 111, 112n, 115n, 131, 131n, 132; and price/earnings ratio, 70n; price record from, 406; as rating agency, 501n; and “second-line companies,” 196, 196n; and security analysis, 290n, 294n, 299; and stock selection for aggressive investors, 202, 377, 379n, 383–87, 388, 389, 390, 397; and stock selection for defensive investors, 350n, 354, 354n, 359, 360, 361, 362, 369, 371, 374–75; and technology companies, 578; website for, 129n, 196n, 250. See also Stock Guide; specific company Standard Oil, 185 Standard Oil of California, 168–69, 289, 292, 350, 351, 353 Standard Oil of New Jersey, 289, 292, 351, 353, 429 Stanley Works, 373 Starbucks, 126 state bonds, 24, 95, 259, 520 Staunton, Mike, 113n steel industry, 167, 379, 383 stock: alternatives to, 15; “delisting” of, 385n; direct purchase of, 128–29; good and bad, 521n; mental value of, 474; and portfolio for defensive investors, 103, 104, 105; public attitude about, 19–20, 19–20n; turnover rate of, 37, 38, 247, 266–67; “watered,” 312n. See also common stock; preferred stock; specific stock or sector of stock stock/equity ratio, 285 Stock Guide (Standard & Poor’s), 144, 169, 354, 383–87, 388, 389, 391, 403, 433, 463, 575–76, 578 stock market: and “beating the pros,” 217–20, 217n; books about, 80–81; in China, 437n; easy ways to make money in, 195n; as going wrong, 202–3; history and forecasting of, 1, 2, 10, 24n, 54, 54n, 65–79, 80–87; 1972 level in, 72–79; structure of, 573–74; total value of U.S., 84. See also financial market stockbrokers. See brokerage houses stockholders. See invest

tor of stock stock/equity ratio, 285 Stock Guide (Standard & Poor’s), 144, 169, 354, 383–87, 388, 389, 391, 403, 433, 463, 575–76, 578 stock market: and “beating the pros,” 217–20, 217n; books about, 80–81; in China, 437n; easy ways to make money in, 195n; as going wrong, 202–3; history and forecasting of, 1, 2, 10, 24n, 54, 54n, 65–79, 80–87; 1972 level in, 72–79; structure of, 573–74; total value of U.S., 84. See also financial market stockbrokers. See brokerage houses stockholders. See investors Streisand, Barbra, 39, 39n, 126 Strong Corporate Bond Fund, 146 Stryker Corp., 482–83 Studebaker-Worthington Corp., 412–13 subscription rights, 495–96, 495n Sullivan, Erin, 245–46 Sun Microsystems, 181, 182, 183, 375 Superior Oil, 490–91, 491n Supervalu Inc., 373 “sure things,” 15–17, 371, 521–22n Swift & Co., 289, 351, 353, 354, 355 Sycamore Networks, Inc., 304 Sysco Corp., 473–75 T. Rowe Price, 105, 107, 148n, 251, 369 takeovers, 429–33, 429n, 487–88, 487–88n. See also specific company tangible-asset value. See book value Target Corp., 373 taxes: and aggressive investors, 134, 149, 149n, 155, 180n, 398; on corporations, 99, 99n, 177; and defensive investors, 91–96, 96n, 99, 99n, 100, 106, 106n, 108, 109, 110, 129, 363n; on dividends, 99, 294n, 493, 495–96, 496n, 507n, 561, 562; and expectations for investors, 23–25, 27, 34; and history and forecasting of stock market, 75; important rules concerning, 561–62; and inflation, 50, 54, 63–64; and interest, 99n, 100, 561, 562; and investor-management relations, 497; and losses, 561, 562; and margin of safety, 520; and market fluctuations, 207–12, 219, 224, 224n; and per-share earnings, 314, 316, 318, 318n, 324n; of regulated investment companies, 561–62; and repurchase plans, 507, 509; and security analysis, 284, 285, 294n, 305; and stock options, 509, 509n. See also specific company TCW, 245 “technical approaches,” 2–3 technology stocks: and aggressive investors, 30, 172n, 173n, 187, 383n; and convertible issues and warr

investor-management relations, 497; and losses, 561, 562; and margin of safety, 520; and market fluctuations, 207–12, 219, 224, 224n; and per-share earnings, 314, 316, 318, 318n, 324n; of regulated investment companies, 561–62; and repurchase plans, 507, 509; and security analysis, 284, 285, 294n, 305; and stock options, 509, 509n. See also specific company TCW, 245 “technical approaches,” 2–3 technology stocks: and aggressive investors, 30, 172n, 173n, 187, 383n; and convertible issues and warrants, 411n; and defensive investors, 126n, 369; and dividends, 490n; in investment funds, 243; and investments vs. speculation, 37; and investor-management relations, 503, 507; and margin of safety, 521–22n; and market fluctuations, 215; and risk, 12; and security analysis, 291n, 299; as “sure things,” 15. See also specific company Teco Energy, 373 telecommunications stocks, 81, 215, 291n, 369, 383n, 437n, 521–22n Teleprompter Corp., 234 television, financial, 258n Telex Corp., 234 Tellabs Inc., 370 Temco Services, 40 Tenneco, 458n Texaco, 187, 289, 292, 351, 353 Texas Instruments, 116, 116n, 490 Third Avenue Funds, 369, 400 3Com, 479–80 3M Co., 305, 372, 568 Thurlow Growth Fund, 243–45 TIAA-CREF, 110, 111n ticker symbols, 40, 40n Ticketmaster Online, 40 Tillinghast, Joel, 400 Time Warner Inc, 442–43. See also AOL Time Warner timing, 156–57, 179–80, 179n, 189–92, 206 TIPS. See Treasury Inflation- Protected Securities Tomlinson, Lucile, 118 Torray (Robert) Fund, 251, 397, 400 Toys “R” Us, Inc., 444, 445 tracking stocks, 396–97 trade names. See brand names trades: costs of, 318n, 363n, 379n, 385n; of delisted stocks, 385n; size of, 247; volume of, 266–68 trading: insider, 479n “trading in the market,” 30 Trane Co., 316 Transamerica Premier Equity Fund, 245 Treasury Inflation-Protected Securities (TIPS), 26n, 63–64, 63n, 211n Tri-Continental Corp., 417 Tricon Global Restaurants, Inc., 477n trust companies, 29, 270, 360n trust funds, 4, 47, 89, 231, 232, 235, 258–59, 259n

Us, Inc., 444, 445 tracking stocks, 396–97 trade names. See brand names trades: costs of, 318n, 363n, 379n, 385n; of delisted stocks, 385n; size of, 247; volume of, 266–68 trading: insider, 479n “trading in the market,” 30 Trane Co., 316 Transamerica Premier Equity Fund, 245 Treasury Inflation-Protected Securities (TIPS), 26n, 63–64, 63n, 211n Tri-Continental Corp., 417 Tricon Global Restaurants, Inc., 477n trust companies, 29, 270, 360n trust funds, 4, 47, 89, 231, 232, 235, 258–59, 259n Tversky, Amos, 151, 221 Tweedy Browne Partners, 397, 542, 543–44, 551 two-part appraisal process, 299–301, 321 Tyco International Ltd., 14, 303, 410n, 426n, 440–42, 442n, 497 Ulysses (mythological figure), 535–36 uncertainty, 535 undervaluation, 261, 508n; and aggressive investors, 13–14, 32, 34, 167, 170, 172–73, 175, 382, 400; and bargains, 167, 170, 172–73; Buffet’s comments about, 537; and margin of safety, 517–18, 520 underwriting, 268–70, 434–35, 518. See also specific company or underwriter Union Carbide Co., 289, 351, 353 Union Pacific Railroad, 362n Union Underwear, 317n unit investment trusts, 226n United Accum., 230 United Aircraft Co., 289, 351, 353 “units,” 414n Universal Marion Co., 393, 394, 395 University of Michigan, 19–20n unpopular large companies, 163–66, 168, 183 Updegrave, Walter, 111n, 219 U.S. Bancorp, 373 U.S. bonds (other than savings), 24, 94–95, 96, 119 U.S. savings bonds, 92, 93–94, 95, 118, 119, 120, 121, 188, 210, 211, 241, 520 U.S. Steel Corp., 289, 351, 353, 384 U.S. Treasury, 110, 496 U.S. Treasury bonds, 63, 94, 106n, 107, 108–9, 111, 112n, 147, 250, 419 U.S. Treasury certificates, 94–95 U.S. treasury securities, 107, 108–9 U.S. Utilities Sector Index Fund, 356n USA Interactive, 307 USG Corp., 175n UST Inc., 216, 368 VA Linux, 152–54 Value Line (investment service), 186, 288, 341, 342, 343 value/valuation: and advice, 259, 261, 274; and aggressive investors, 32, 33, 137, 166, 167, 177, 178, 380n, 391n; and bargains, 166, 167, 177, 178; Buf

353, 384 U.S. Treasury, 110, 496 U.S. Treasury bonds, 63, 94, 106n, 107, 108–9, 111, 112n, 147, 250, 419 U.S. Treasury certificates, 94–95 U.S. treasury securities, 107, 108–9 U.S. Utilities Sector Index Fund, 356n USA Interactive, 307 USG Corp., 175n UST Inc., 216, 368 VA Linux, 152–54 Value Line (investment service), 186, 288, 341, 342, 343 value/valuation: and advice, 259, 261, 274; and aggressive investors, 32, 33, 137, 166, 167, 177, 178, 380n, 391n; and bargains, 166, 167, 177, 178; Buffet’s comments about, 540–41; business vs. stock- market, 198–207; and dealings with brokerage houses, 267; and defensive investors, 22–23, 24, 25, 26, 27, 120, 122, 125, 364; dependability of, 318n, 321; and “enhancing shareholder value,” 309; financial analysts as creating, 568; and history and forecasting of stock market, 74, 83, 87; importance of, 533; inflated, 267; and inflation, 54, 58; and investment funds, 238, 239, 241, 245; and investor- management relations, 498n; and margin of safety, 520, 521, 522; and per-share earnings, 318, 318n, 320; and price, 10, 32, 36, 39n, 40, 122, 206, 521, 522, 541; and problems of brokerage houses, 267; “quotational,” 20, 36; and repurchase plans, 507; and risk, 122; and security analysis, 281–82, 285, 288–90, 294, 295–98, 300; and selection of stock, 364, 380n, 391n; and speculation, 569; and stock splits, 493n; and two-part appraisal process, 299–301. See also earnings; fluctuations, value/valuation (cont.) market; overvaluation; price/earnings ratio; undervaluation; specific company or type of security Van Wagoner Funds, 243–45 Vanguard Group, 63, 64, 107, 110, 132, 248, 249, 251, 369, 400, 420, 420n, 510 Veres, Robert, 259n, 276n, 278 VF Corp., 373 video game, financial, 38–41 Vilar, Alberto, 16 Vinik, Jeffrey, 37 vodka-and-burrito portfolio, 148 volatility, 245, 356n, 406n, 420n, 509, 509n. See also stability volume: trading, 312n Volvo, 250 Wal-Mart Stores, 185, 247, 373 Walgreen Co., 373 Walker, Rob, 323n Wall Street: ref

earnings ratio; undervaluation; specific company or type of security Van Wagoner Funds, 243–45 Vanguard Group, 63, 64, 107, 110, 132, 248, 249, 251, 369, 400, 420, 420n, 510 Veres, Robert, 259n, 276n, 278 VF Corp., 373 video game, financial, 38–41 Vilar, Alberto, 16 Vinik, Jeffrey, 37 vodka-and-burrito portfolio, 148 volatility, 245, 356n, 406n, 420n, 509, 509n. See also stability volume: trading, 312n Volvo, 250 Wal-Mart Stores, 185, 247, 373 Walgreen Co., 373 Walker, Rob, 323n Wall Street: reform of, 437 Wall Street Journal, 30, 81, 186, 310, 317, 397 Walton, Sam, 185 Warner-Lambert Co., 167n warrants, 3, 3n, 134, 311, 316, 318, 403, 403n, 406, 411, 412, 413–21, 413n, 414n, 522, 522n. See also specific company Wasatch, 251 Washington Mutual, 375 Washington Post Co., 217, 401, 545–46, 547, 558 Wasserstein Perella, 478 “watered” stock, 312n Watson, T. L., Sr., 566 Webvan, 505 Welles, C., 235–36 West Point Pepperell, 391, 392 Westinghouse Corp., 351, 353 Westinghouse Electric Co., 289 Wheelabrator-Frye, 469n Whiting Corp., 467–69, 469n, 470 Whitman, Martin, 400 Wiesenberger Financial Services, 158, 230, 239, 241 Willcox & Gibbs, 467–69, 469n, 470 Williams, Jackie G., 433–34, 433n, 436 Williams Communications, 304 Wilshire indexes, 27–28n, 215, 216, 243–45 Winstar Communications, 81 wireless stocks, 172n Woolworth Company (F. W.), 289, 351, 354, 355, 569 working capital: and aggressive investors, 166, 169, 169n1, 170, 186, 381, 382, 385, 387–93, 391n; and defensive investors, 348, 356, 369, 370, 371; and dividends, 492; and security analysis, 281 “workouts,” 155, 156, 174–75, 393–95, 522 WorldCom, 14, 127, 146–47, 303, 304n, 423n, 426n, 429n, 497 Worthington Steel, 368 W. R. Grace, 175n Wyeth, 455n Xerox Corp., 14, 199, 295, 297, 392, 456 Xilinx Inc, 370 Y2K bug, 342–43n Yahoo! Inc., 213, 475–77, 476n yield: and aggressive investors, 134, 135, 136–37, 138, 394; and convertible issues and warrants, 404, 404n, 411–12; and defensive investors, 26, 89, 91, 92, 93,

348, 356, 369, 370, 371; and dividends, 492; and security analysis, 281 “workouts,” 155, 156, 174–75, 393–95, 522 WorldCom, 14, 127, 146–47, 303, 304n, 423n, 426n, 429n, 497 Worthington Steel, 368 W. R. Grace, 175n Wyeth, 455n Xerox Corp., 14, 199, 295, 297, 392, 456 Xilinx Inc, 370 Y2K bug, 342–43n Yahoo! Inc., 213, 475–77, 476n yield: and aggressive investors, 134, 135, 136–37, 138, 394; and convertible issues and warrants, 404, 404n, 411–12; and defensive investors, 26, 89, 91, 92, 93, 95, 96, 97, 98, 107, 110, 113, 113–14n, 124, 125, 350; fluctuations in, 193, 207–12; and history and forecasting of stock market, 71, 77, 78; and inflation, 57; and speculation, 573. See also dividends; interest; performance; return; type of security Yum! Brands, Inc., 475–77, 477n Zenith Radio, 335 Ziv, Amir, 506, 506n ZZZZ Best, 433–34n About the Authors BENJAMIN GRAHAM (1894-1976), the father of value investing, has been an inspiration for many of today’s most successful businesspeople. He is also the author of Securities Analysis and The Interpretation of Financial Statements. JASON ZWEIG is a senior writer at Money magazine, a guest columnist at Time, and a trustee of the Museum of American Financial History. Formerly a senior editor at Forbes, he has written about investing since 1987. Cover design by mucca design Credits Interior Designed by Nancy Singer Olaguera Grateful acknowledgment is made for permission to reprint: “The Superinvestors of Graham-and-Doddsville,” by Warren E. Buffett, from the Fall 1984 issue of Hermes, Magazine of Columbia Business School. Reprinted by permission of Hermes, Magazines of Columbia Business School, copyright © 1984 The Trustees of Columbia University and Warren E. Buffett. “Benjamin Graham,” by Warren E. Buffett, from the November/December 1976 issue of Financial Analyst Journal. Reprinted by permission of Financial Analysts Federation. T HE INTELLIGENT INVESTOR—Revised Edition. Copyright © 1973 by Benjamin Graham

ille,” by Warren E. Buffett, from the Fall 1984 issue of Hermes, Magazine of Columbia Business School. Reprinted by permission of Hermes, Magazines of Columbia Business School, copyright © 1984 The Trustees of Columbia University and Warren E. Buffett. “Benjamin Graham,” by Warren E. Buffett, from the November/December 1976 issue of Financial Analyst Journal. Reprinted by permission of Financial Analysts Federation. T HE INTELLIGENT INVESTOR—Revised Edition. Copyright © 1973 by Benjamin Graham. New material: Copyright © 2003 by Jason Zweig. All rights reserved under International and Pan-American Copyright Conventions. By payment of the required fees, you have been granted the non-exclusive, non-transferable right to access and read the text of this e-book on-screen. No part of this text may be reproduced, transmitted, down-loaded, decompiled, reverse engineered, or stored in or introduced into any information storage and retrieval system, in any form or by any means, whether electronic or mechanical, now known or hereinafter invented, without the express written permission of PerfectBound™. PerfectBound™ and the PerfectBound™ logo are trademarks of HarperCollins Publishers, Inc. AdobeAcrobat eBook Reader June 2003 eISBN 0-06-058328-2 10 9 8 7 6 5 4 3 2 1 About the Publisher Australia HarperCollins Publishers (Australia) Pty. Ltd. 25 Ryde Road (PO Box 321) Pymble, NSW 2073, Australia http://www.perfectbound.com.au Canada HarperCollins Publishers Ltd. 55 Avenue Road, Suite 2900 Toronto, ON, M5R, 3L2, Canada http://www.perfectbound.ca New Zealand HarperCollinsPublishers (New Zealand) Limited P.O. Box 1 Auckland, New Zealand http://www.harpercollins.co.nz United Kingdom HarperCollins Publishers Ltd. 77-85 Fulham Palace Road London, W6 8JB, UK http://www.uk.perfectbound.com United States HarperCollins Publishers Inc. 10 East 53rd Street New York, NY 10022 http://www.perfectbound.com