Quotes About Analysis

The Interborough issues are an example of a rather special group of situations in which analysis may reach more definite conclusions respecting intrinsic value than in the ordinary case. These situations may involve a liquidation or give rise to technical operations known as "arbitrage" or "hedging.

Many skeptics, it is true, are inclined to dismiss the whole procedure [chart reading] as akin to astrology or necromancy; but the sheer weight of its importance in Wall Street requires that its pretensions be examined with some degree of care.

inversor representará una pequeña sección transversal

The heart of Graham's argument is that the intelligent investor must never forecast the future exclusively by extrapolating the past.

Security analysis cannot presume to lay down general rules as to the proper value of any given common stock... The prices of common stocks are not carefully thought out computations, but the resultants of a welter of human reactions.

Instead of listening to Hoffman and his lapdog analysts, traders should have heeded the honest warning in Commerce One's annual report for 1999: "We have never been profitable. We expect to incur net losses for the foreseeable future and we may never be profitable.

The rate of return sought should be dependent, rather, on the amount of intelligent effort the investor is willing and able to bring to bear on his task.

Here are some quick considerations for the intelligent investor: Is the "net pension benefit" more than 5% of the company's net income? (If so, would you still be comfortable with the company's other earnings if those pension gains went away in future years?) Is the assumed "long-term rate of return on plan assets" reasonable? (As of 2003, anything above 6.5% is implausible, while a rising rate is downright delusional.)

Three solid books full of timely and specific examples are Martin Fridson and Fernando Alvarez's Financial Statement Analysis, Charles Mulford and Eugene Comiskey's The Financial Numbers Game, and Howard Schilit's Financial Shenanigans.

Read backwards. When you research a company's financial reports, start reading on the last page and slowly work your way toward the front. Anything

Thus, in sum, we say that to have a true investment there must be present a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience.

Instead, calculate a stock's price/earnings ratio yourself, using Graham's formula of current price divided by average earnings over the past three years.

An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return."1 Note that investing, according to Graham, consists equally of three elements:

Principle for the securities analyst: Nearly every issue might conceivably be cheap in one price range and dear in another.

Lynch insists that no one should ever invest in a company, no matter how great its products or how crowded its parking lot, without studying its financial statements and estimating its business value.

The quantitative factors lend themselves far better to thoroughgoing analysis than do the qualitative factors. The former are fewer in number, more easily obtainable, and much better suited to the forming of definite and dependable conclusions.

Security analysis does not assume that a past average will be repeated, but only that it supplies a rough index to what may be expected of the future. A trend, however, cannot be used as a rough index; it represents a definite prediction of either better or poorer results, and it must be either right or wrong.

Analysis is concerned primarily with values which are supported by the facts and not with those which depend largely upon expectations.

The analyst's conclusions must always rest upon the figures and upon established tests and standards.

What's needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.

Be sure to compare the footnotes with those in the financial statements of at least one firm that's a close competitor, to see how aggressive your company's accountants are.

you will be wiser to form your own ideas of the value of your holdings, based on full reports from the company about its operations and financial position.

Graham's definition of investing could not be clearer: "An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return."1 Note

The intelligent investor will remember the wise words of financial analyst Mark Schweber: "The one question never to ask a bureaucrat is 'Why?