By Jacob Wolinsky. Originally published at ValueWalk.
THE INTELLIGENT INVESTOR
The Intelligent Investor wtih Zweig’s Commentary0:00we study billionaires in this episode 88 the investors podcast adjusting from Bel
0:14Air Maryland investors podcast
0:20since summarize the lessons waters tell you when it’s cold will give you
0:27investing strategies your host Preston Parrish and staying person has everybody
0:36doing out there this presentation of Yahoo’s for the investors podcast and as
0:40usual on the company by Mike Obel stick brodersen out in Denmark today we’ve got
0:46a book a lot of people talk about the author of the book is Benjamin Graham
0:51Benjamin Graham Road two books that were really famous person security analysis
0:56which we’ve done an episode on and then the other book is the Intelligent
1:00Investor so to just give everyone a quick background if you’re joining us
1:04for the first time on the show maybe don’t have Benjamin Graham is so
1:07Benjamin Graham was born buffett’s professor at Columbia and RAM started
1:12teaching at columbia university back in 1928 he wrote this book and it was the
1:17textbook that he used in his class and the text book was called security
1:21analysis which we’ve done the previous episode how many episodes ago was that
1:24stick like 20 or something like that yeah that sounds about right about
1:28twenty episodes ago and so when Graham wrote this book security analysis
1:32security analysis was published back in 1934 so all this was really kind of
1:37going on during the Great Depression and Graham then was professor for quite a
1:42few years he ended up being the professor for Warren Buffett and Warren
1:47Buffett whose net worth is I don’t know where it’s at right now maybe seventy
1:50billion 65 billion something like that it’s it’s way up there one of the
1:54wealthiest people in the entire planet has said that everything that he’s
1:58learned in his investing approach was completely shaped by Benjamin Graham the
2:02author of these two books and so that’s why we really like to place a lot of
2:07emphasis on Benjamin Graham he’s you know the founder of value investing a
2:13lot of people have attributed their massive net worth to following the
2:17principles of management so in today’s episode we’re gonna be reviewing the
2:22Intelligent Investor by Benjamin Graham and where this book is a little bit
2:26different than security analysis is that the intelligent investor’s a
2:30watered-down
2:31may be easier version definitely geared towards the common investor opposed to
2:37like a security analyst that does a professionally working for a big bank so
2:42this is for the common investor and how they can invest so what we’re gonna do
2:46sticking I came up with actually sticking up with the agenda I should say
2:49he email it to me
2:52sticking up with the agenda in the way he broke it out as he said president
2:55let’s do chapters one through seven in the first segment two Chapter II that’s
3:00a really important one and we’re gonna do nine through nineteen and then
3:04chapter 20 all by itself so we’ll talk about intrinsic value to all sorts of
3:09things in hopefully you guys enjoy this one so let’s go ahead and start this off
3:12gonna be reviewing the first seven chapters 1 through 7 he kinda hit in the
3:17highlights between the two of us so the book starts off with a very very
3:22important discussion and that discussion is distinguishing between an investor in
3:28a speculator so here’s the difference
3:323m says that in when you’re an investor do not seeking a massive return in a
3:37short duration or short period of time you’re looking for a reasonable return
3:42and so grand doesn’t necessarily say a reasonable return is 10% or less or
3:47anything like that he believes that really up to the reader to determine but
3:51I think gramm would probably say if you’re looking for a 50 percent return
3:55in a one-year span her one-year timeframe that’s probably getting into
3:59the room where you’re here you’re looking for excessive gains net really
4:03starts to become speculative in nature so the second part is that when you have
4:09an investor he’s doing something to promote the safety of the return of on
4:13the principle so that an investor won’t do anything they’re really compromises
4:18his principal in in any type of extreme manner so you know let’s say you were
4:22gonna invest in a large cap company let’s just say it was a company like
4:27Apple and you were looking at Apple’s returns and their revenues were really
4:31steady they had all these insistent numbers in the expectation is that
4:35they’re going to continue to earn at least the level that there
4:38earning today into the future and there’s no really anything to you can
4:43see on the horizon that would cause a major disruption in that in the next
4:47couple years that would be an example of investing because at this point I’m you
4:53can’t necessarily say the revenues or the net income is all over the place so
4:59it’s not something that you can actually projector predict where the bad event
5:03has been occur that’s where you get into more of an investing approach opposed to
5:07a speculative approach you know back in the day SiriusXM Radio their net income
5:12was up and down there moving stuff off their balance sheet on their income
5:16statement it was just kind of a mess if you look at their financials and so at
5:20that point I’m you could as an investor versus a speculator you could look at
5:24that pic and say you know next quarter they could have negative net income
5:29where they just had a positive one that could totally happen based off their
5:32track record in the things that have happened if you know that as a person as
5:36a person is looking to invest up front and you know it could potentially be bad
5:42you’ve identified an event that could jeopardize your principle which it now
5:48goes into we would then gramm would call speculation opposed to invest because
5:53you already know the event occurred really kind of come crashing down to
5:57thats it those are the two things you gotta be able to protect your principal
6:00and you’ve got to go after things that are giving new reasonable returns and
6:05that’s what he would classify as investing so here’s the direct quote out
6:09of the book he says investing is promoting the safety of the principal
6:13and an adequate returns that’s where I’m pulling that from and this is big I mean
6:18this is huge for a person to really kind of understand that I know it sounds
6:23really simple but if you aren’t doing that then you are speculating then you
6:29are saying I feel like this is the direction things are going to going
6:33anything he started throwing out the fuel word opposed to I have looked at
6:38the company’s cash flows
6:40they have been very consistent over the last five years looking towards the
6:45future I expect those cash flows to continue to remain consistent if not
6:50slightly grow and because of that when I
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