Comments on: The Intelligent Investor: Investment Versus Speculation

By: Eric

Eric — Mon, 20 Oct 2008 15:21:21 +0000

The main thing I got out of this chapter was the compare and contrast between Graham’s definition of a Defensive (i.e., passive) investor and an Aggressive investor.

As a relatively uneducated investor (although perhaps only in my own mind’s eye), these concepts were somewhat unfamiliar to me but made perfect sense. Where I am now, I’d consider myself a Defensive investor. I’ve got my regular and automatic contributions going into my Federal TSP and my Roth IRA and I forget about them for the most part. “Fix and forget it.”

With patience and more education and experience, I hope to be more of an Aggressive investor.

By: Dan

Dan — Sat, 18 Oct 2008 11:09:26 +0000

I find it hard to understand a book and review like this. When I read things telling me vaguely to do something, it’s almost better not to read it at all. For example, the book says to “study carefully before you buy” and “don’t invest without knowing …” and “have an investment philosophy”. Study what? Know what? Have what investment philosophy?
This is like telling me,”Go downtown and you will see many things..”, then I go get lost on the way because I don’t know the way, then get lost, frustrated, give up and go back home where I’m comfortable.

Just telling me to “do” something without any meaning is useless.

By: Shane H

Shane H — Fri, 17 Oct 2008 23:36:39 +0000

Remember too Warren Buffets words of wisdom about Index funds:” A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money,”

Love the site BTW

Shane

By: Katie

Katie — Fri, 17 Oct 2008 21:36:21 +0000

In defense of Cramer, he doesn’t advocate buy and hold. He moved his fund out of a lot of these names before they crashed. He also foresaw this mortgage mess (youtube his rant, it’s quite entertaining, but more chilling, it’s right on). His advice is not for people who want to buy stocks and wait 10, 20 years for their profits to grow, so it’s harsh and a bit unfair to point out that his picks failed when he himself realized they were going to and got the heck out of them. That is NOT to say he’s always right, at all!

By: Kevin

Kevin — Fri, 17 Oct 2008 18:52:56 +0000

A Buffet biography just came out recently that I’m going to check out soon. This book might have to come after that one on my “to-read” list.

By: David T.

David T. — Fri, 17 Oct 2008 17:06:44 +0000

I think this review is great but it is important to keep in mind that Warren Buffet also disagreed with many of Graham’s philosophies. Graham wanted to judge everything by numbers only. As Buffet grew in experience he realized that things like “the moat”, reputation and management experience also had some value and needed to be factored into the equation.

David

By: David

David — Fri, 17 Oct 2008 16:01:14 +0000

From what I think I have learned about Buffett and Graham, I don’t think Buffett is doing anything markedly different than what Graham advocated fifty years ago: wait for Mr. Market to offer you a piece of a good company at a bargain price, and buy it. Buffett does use the “moat” analogy quite a bit (high barriers to entry) that help refine the search.

I would caution about placing too much stock (sorry, had to take the pun) in book value, and finding values in companies selling for less than book. General Motors may have billions in book value, but the true measure is what the next best use of those assets is worth. Exampele: Is a John Deere combine in Boone, IA “worth” its book value? You bet–the farmer in Oskaloosa can use it tomorrow for its identical, intended use. Is that same John Deere combine worth its book value if it is parked on St. Croix, Virgin Islands? I think it should be discounted. Now think about General Motors’ book value. How much of that is represented by industry-specific tooling bolted to the floor of a factory in Flint? Who is going to pay “full price” for that? Not me, and I don’t think you should either. Having said that, I just bought ADM which was selling at a discount to its book value. GM may have trouble selling cars, but I don’t see ADM having trouble selling agricultural products based on corn and soybeans. Those assets (even the ethanol refineries) should be productive for years to come. (And as you may suspect, I, like Trent, live in Iowa…)

By: Derek

Derek — Fri, 17 Oct 2008 15:40:49 +0000

Hey Trent, I just want to thank you for doing this. I Have read The Intelligent Investor before, but this is helping me reread it and it is helpful. Thank you.

By: JonFrance

JonFrance — Fri, 17 Oct 2008 15:39:44 +0000

@Ryan:
In addition to what Tyler mentions which answers your question more directly, it’s important to note that Warren Buffet learned investing directly from Graham at Columbia. Graham was Buffet’s mentor, and had such an effect on him that he named one of his sons after him. Knowing this helps put his quote about The Intelligent Investor in context.

By: Russ

Russ — Fri, 17 Oct 2008 14:54:12 +0000

I believe in a variation of Graham’s philosophy . . .

I believe that regardless of how well you know and understand a company, there is still an abnormal amount of risk associated with individual companies and their stocks. Even if you own 20 or 30 or 40, it’s still difficult to diversify away company or industry specific risks.

My alternative for my self and the families I work with is to invest in a low cost, tax efficient, highly diversified portfolio of institutional index-type funds with exposures to all the markets around the world. The result is a portfolio of over 10,000 underlying securities.

Obviously, there’s no way to “know” what you’re investing in with this approach, but it’s very important to understand the relationship between risk and return and know how and why you’re invested in the manner you choose.

As Buffett as has said many times before, “Risk is not knowing what you’re doing”

Great post, thanks

By: Tyler @ Dividend Money

Tyler @ Dividend Money — Fri, 17 Oct 2008 14:54:01 +0000

Ryan,
To my knowledge Warren has not written any books himself. But many have been written about him; including “The Warren Buffett Way”.
His Berkshire Hathaway shareholder reports are liekly the best reading you will find with regard to Warren’s views on investing.

By: Ryan McLean

Ryan McLean — Fri, 17 Oct 2008 14:47:41 +0000

Sounds like a really cool book.
Did Warren ever write any books himself? If he has then Im sure they might even be better than this book now.
When are you writing your book?
I released my first ebook yesterday called “Make Money Commenting”…it has had small success but I can improve a lot as a writer and marketer

By: Tyler @ Dividend Money

Tyler @ Dividend Money — Fri, 17 Oct 2008 14:13:17 +0000

This specu lation mentality is exactly what is driving the fear in the marketplace right now.
Why do you think Warren Buffett is buying and investing now…because some companies are seriously undervalued due to fear and specualtion.
There are some companies that are selling for less than thier book value!
(This means that if all of the company assets were liquidated, they would end up with more money than if they sold all of the outstanding shares in the marketplace.)
Do your due diligence, buy great companies, wait 5-10 years and become wealthy.
Buffett is investing now, are you?