25 pages a day - April 2018*

The Intelligent Investor: The Definitive Book on Value Investing

*More like almost 25 pages a day, and a week or two of May included.

I've discussed some parts of this book in my first post here, and there's more to it. Graham mentions another significant difference; between the defensive and the enterprising investor. The difference being not much money one puts in compared to the other, but how much time they spend researching and picking their investments. The defensive investor would stick to low-cost index funds balanced with government bonds, while the enterprising counterpart may risk individual stock selection, but not before carefully wading through at least a few years of the financial statements of the companies. He warns about earning figures inflated by recent revenues and shady accounting practises, suggesting one use average figures (.e.g for earnings per share) over past few years instead to determine if a stock is worth buying. "There is no good or bad stocks, only cheap and dear ones."

The efficient market hypothesis states that securities would more or less be perfectly priced (trading at fair value), and price disparities would not remain unexploited for too long. This theory is also mentioned in a few places, along with counterexamples from not too long ago. The market is not perfect, and will probably never be as long as emotion drives the decisions of a considerable chunk of its participants.

There's a short primer on evaluating financial statements, which tells you what to look at: stability and growth of earnings, historical records of dividends paid, size of the company, management etc. There's also actual values for "acceptable" P/E ratio, earnings per share, and price-to-book ratios, but I'm not sure how relevant these are today (since the book was last updated in the 70s). The latter half of the book is filled with tons of examples, comparing companies, discussing irrational market behaviour, and stories of exceptional returns achieved by people known to the author. If you only read one book about investing, this one wouldn't be a bad choice.