A Modern Approach to Graham and Dodd Investing

Benjamin Graham and David Dodd were among the first investors to make the transition from thinking like traders to thinking like owners. In the shadow of the 19... » 

Benjamin Graham and David Dodd were among the first investors to make the transition from thinking like traders to thinking like owners. In the shadow of the 1929 stock market crash, they posed a set of questions that are still applicable today: What would a reasonable businessperson, as opposed to a speculator, pay for a company and still consider that he or she was getting a bargain? What entry price would almost guarantee at least an eventual return of capital with good prospect for gains? Could a prudent investor reasonably allow for a margin of safety in his or her purchase? Although the questions have remained the same, the ways to answer them have changed. A Modern Approach to Graham and Dodd Investing examines the classic Graham and Dodd approach to valuation and updates it for the twenty-first century. Thomas Au, a portfolio manager with a leading insurance company and ex—Value Line analyst, reworks the basics of value investing from net present value, financial statement analysis, and return on capital to return and leverage, asset allocation, and diversification. Before learning about the modifications to Graham and Dodd’s principles of value investing, you’ll be introduced to some basic investment concepts and mathematical measures for the calculation of investment returns. From there--although the focus of the book is on stocks--you’ll first become familiar with bonds, because an understanding of the risk and return characteristics for bonds underpins an understanding of those for equities. Recent examples, including Enron and WorldCom, are introduced throughout these pages, to illustrate exactly how you can use this updated approach to your advantage. «