One sentence summary of “The Intelligent Investor”: Lots of people dream of making a fortune on the stock market, but few of them truly succeed in this difficult task. Benjamin Graham, the father of value investing and mentor to Warren Buffett, offers a practical guide to long term success using the value investment philosophy which he helped to found.
By Benjamin Graham, revised edition of 1973.
Guest chronicle written by Serge from the blog Be Rich Corp focussing, among other things, on stock market investments.
Chronicle and summary of “The Intelligent Investor”:
Chapter 1: Investment versus Speculation
Graham explains the fundamental differences between 2 types of stock market behaviour: investment and speculation.
An investment is defined as an operation which, after thorough analysis, promises the security of the capital invested and an adequate return on the capital. An operation which does not satisfy these criteria is called speculation.
In Wall Street jargon, we tend to call anyone who invests in the markets an “investor”, but Graham makes a clear distinction between these two kinds of behaviour. He doesn’t prohibit speculation and admits that it can be perfectly intelligent, but formally advises against investing and speculating from the same account.
Chapter 2: The Investor and Inflation
Following a period of strong inflation which began in 1965, many financial professionals at the time claimed that the nature of bonds made them a less good investment than shares.
Graham takes a very different position on this topic: it is absurd to claim that shares, even if they are very high quality, are necessarily a better investment than bonds under any kind of market condition. It would be just as absurd to claim the contrary. While shares have outperformed bonds over some very long periods in the past, nothing can guarantee that the share market is not being overvalued and due to this will not generate a return on investment that is weaker than the bond market. All possible outcomes can be envisaged!
Looking at historic figures, Graham also demonstrates that the preconception that stipulates that moderate inflation has a positive influence on company profits is equally false.
He also discusses the consistently common practice of buying gold to counter inflation. He explains that it was a very good thing that this was banned in the US from 1935 to 1972, because gold only increased by 35% during that entire period. And furthermore, the physical owner of the gold did not receive any return on his capital during all that time. Putting his money into any kind of a savings account would have generated a better return.
Chapter 3: A Century of Stock-Market History
In this chapter, Graham studies the behaviour of the Dow Jones (DJIA) and the S&P 500 from 1900 to 1970.
He distinguishes 3 main phases:
From 1900 to 1924, there were alternating upward and downward trends that lasted between 3 and 5 years. The average annual return on investment was around 3% per annum.
Then there was a stock market high followed by the Great Depression of 1929. Until 1949, the market experienced irregular fluctuations, and its average performance was 1.5% per annum.
In other words, in 1949 the number of people who were enthusiastic about the idea of buying shares had dwindled considerably. Obviously, the market went on to take an upward trend that lasted until 1969! There were two important recessions in 1956-57 and 1961-62, but they were short-lived and followed by rapid recovery. The average performance of the DJIA from 1949 to 1969 was 11% per year, without counting dividends, which were around 3.5% per year. In 1969, everybody thought that these kinds of results could go on indefinitely.
That was when the DJIA fell by 37%! Performance for the S&P 500 from ‘49 to ‘71 was set at 9% per year.
In addition to this, if you look at the changes in corporate profits, they remained pretty much consistently on the rise. There were just two downward trending decades (1891-1900 and 1931-1940), which justifies the viability of consistently having part of your investments in long-term shares.
When you look at the historical progression of the price/profit ratio per share of the indexes (price divided by the profit per share for the previous year, applied to all of the companies that make up the DJIA or S&P 500 index, jointly known as PE or PER – Price Earnings Ratio), you will notice that it was just 6.3 for the S&P 500 in June 1949, while the dividend was 7%. In March 1961, the PE was 22.9 for a dividend of 3%. And in other words, you could buy shares in US stock market companies paying just 6.3 times their earnings in 1949, but in 1969, you would have had to pay 22.9 times their earnings – 3.6 times more expensive! In the meantime, the rate of bonds went up by 2.6% in 1949 to 4.5% in 1961.
This demonstrates a real change in attitude towards shares between the two periods: Clearly, people were prepared to pay much more for the profits of the S&P 500 companies in 1961 than they were in 1949. Moving from one extreme to another should awaken a great sense of precaution in an investor, because it could indicate that the stock market is overvalued.
At the end of the chapter, Graham offers his opinion about the state of the market in 1972, believing that a tumble in the stock market was around the corner (the future proved him right with the terrible recession of 1973-1974).
Chapter 4: General Portfolio Policy: The Defensive Investor
Graham is not looking to define an objective in terms of a return on a portfolio. He believes that the earnings will depend on the “intelligent effort” that the investor will deploy when building his portfolio. Therefore, modest earnings will go to the passive investor who seeks both security and serenity, while the more enterprising investor will enjoy greater earnings as he plays his winning hand of intelligence and talent.
Graham goes on to suggest strategies for allocating capital between bonds and shares.
A defensive investor must divide his portfolio between bonds and high quality shares. Fundamentally, Graham recommends a 50%-50% allocation by default. When the level of the stock markets appears to be high, like it was in the 1970s, because of high PE and low dividends, you can switch to an allocation of 75% bonds and 25% shares. It is easier said than done, because a feeling of general euphoria surrounds the stock market in times like these. Similarly, after the stock market takes a tumble, if dividends are significantly higher than bond earnings, the investor can increase the proportion of shares.
The balance between shares / bonds depends in practice on the temperament of the investor and the policy presented is just a guideline.
Chapter 5: The Defensive Investor and Common Stocks
Shares have their place in any portfolio because there are long periods during which they outperform bonds, and these periods happen more often. Due to this, shares have historically been a better safeguard against inflation than bonds.
They also have another advantage that is inherent to their nature: shareholder profits are partially reinvested in the company, and they multiply over time, while bonds offer a fixed rate that you know in advance, whatever happens to the company profits.
Choosing shares is relatively simple for the defensive investor. Simply follow 4 rules:
- The portfolio needs to be sufficiently diverse, but not excessively so. 10 to 30 shares are quite sufficient.
- Some of the companies in the portfolio should be large in size, recognised and financed in a conservative way. In other words, they must not be in too much debt.
- Each of the companies should have a long history of paying dividends. Graham suggests taking a 20 year period as an example.
- The investor must not pay more than 25 times the average profits of the company over the past 7 years, and not more than 20 times the profits from the last year (making a maximum PE of 20). This constraint removes all the shares belonging to growth companies that are trading for high multiples of their profits.
The final constraint allows you to provide against any eventual disappointments when it comes to the growth in profits of the company in question. Graham gives the example of IBM, which was long considered to be the best company at the time, and yet the IBM share price was cut by 5 as soon as the results disappointed.
Graham also recommends using the method of monthly investment averaging from the bottom: The lower a share price drops, the more shares you buy, and the higher a share price rises, the less shares you buy This method is even recommended for small amounts: after 20 years, it can work wonders.
He also emphasizes that the shares chosen by the defensive investor are not risky, and they should not be confused with risk, which is that of irrevocably losing all the capital invested, with the volatility induced by the periodic fluctuation of the stock exchange.
Chapter 6: Portfolio Policy for the Enterprising Investor – Negative Approach
The enterprising investor must start with the same bases as a defensive investor, by choosing how he will allocate his capital between quality bonds and quality company shares that he can buy at a reasonable price. The difference is that he will remain ready to invest in other kinds of instruments, but every deviation from the base line of conduct should be justified by good logical reasoning. The world of possibilities for this type of investor is truly vast: his choices will mainly depend on his skills and temperament.
However, there are some general recommendations about what not to do. In general, he will avoid bonds and convertible securities of lower quality, unless these instruments can be purchased at a maximum price that is equal to 70% of parity for higher coupons and at a much lower price for those with a lower coupon. He will not buy foreign bonds, however attractive the coupons may appear. He will also avoid newly issued instruments (stock market introductions, convertible securities, new bonds, etc…), as well as shares whose dividends have only performed excellently recently.
For investments in bonds, the enterprising investor would be well advised to behave like his defensive counterpart. The risk of default for quality bonds is not worth taking: a drop in the face value of the bond could be fatal to the investor, who may never see his money again. Graham warns against approaches that recommend buying a collection of low quality bonds (known as “junk bonds”) on the pretext that the overall set will offer better yield that good quality bonds. They forget to specify that an investor can never buy all the “junk bonds” on the market. Therefore, Graham does not even bother checking whether this conclusion is exact or not.
Investors should also avoid stock market introductions because many companies that are worth nothing have an annoying habit of being introduced to the market at very high prices, especially when markets are bullish and euphoria reigns.
Chapter 7: Portfolio Policy for the Enterprising Investor – The Positive Side
When it comes to bonds, Graham advises the enterprising investor to choose certain US State bonds that have a coupon between 5 and 7.25% depending on the types.
When it comes to shares, the enterprising investor will try:
- to buy when the market is low and sell when it is high
- to buy growth stocks that he chooses carefully.
- and to buy cheap instruments
- to invest in special situations
There are some problems to overcome, because it is not simple to determine whether the market is high or low. It is even less easy to choose growth shares, because they often sell at a very high price: Consequently, paying a high price contains an element of speculation
To obtain above average results, the enterprising investor should provide logical and quality reasoning that must differ from the policy followed by most other investors and speculators. If he acts like everyone else, he will logically obtain the same results!
Graham recommends three approaches that work, based on his experience:
- Buy shares in big, unpopular companies: the market tends to over-evaluate fashionable companies or ones that are experiencing strong growth, while it tends to under-evaluate, in a relative way, unpopular companies that encounter temporary obstacles. In principle, the approach can be tried with companies that are small in size, but the risk that these companies will continue to be ignored by the market is much higher, and this can happen even if they start to have improved profits. The market can react in a much more reasonable time frame for these big companies, and this is an important advantage.
- Buy discount instruments: this involves buying instruments (shares or bonds) whose value is over 50% higher than their price. This often happens when profits are temporarily disappointing. But be careful to ensure that the nature of the disappointment is indeed temporary: if it turns out to be permanent, the result will be unfortunate. One way to identify discount shares is to take them from companies with a value of current assets released from all debt that is higher than their market capitalisation. A diverse portfolio of such shares behaves very well in terms of performance based on Graham’s experience.
- Take part in special operations: this type of investment is complicated and Graham chooses not to go into it in The Intelligent Investor. He briefly mentions arbitrage, but competition has become fierce in this field over time. It is not for everyone, and it requires special knowledge.
Does it work? I have been applying this approach at a personal level for almost 9 years and currently the ROI is over 40% per year and I recently began following it professionally. The future will reveal whether this method of intelligent investment will continue to work for us.
Chapter 8: The Investor and Market Fluctuations
When the investor invests in good quality bonds that mature within a relatively short period of time, let’s say less than 7 years, he will not be heavily impacted by market fluctuations. Bonds that take longer to mature are more likely to fluctuate, and there is no doubt that the price of shares will fluctuate over time. The investor must be fully aware of this and be prepared both psychologically and financially.
As all shares, even high quality ones, will fluctuate strongly in terms of price, the investor must make the most of it. There are two known methods: “timing” and “pricing”.
“Timing” consists of buying when you anticipate that prices are going to go up and to sell, or to stop yourself from buying, when you anticipate a price drop. “Pricing” consists of buying shares in a company below their intrinsic value and selling them when they go above it.
Carrying out “timing” naturally gives the investor speculator status: that is why Graham recommends that we work on “pricing”. It can happen that some speculators get good results, bus this is not going to be the case with the average person. With “pricing”, the average investor has the best chance to reach very satisfactory results simply by buying shares at a low price and selling them at a high price, without taking any market movements into consideration.
For long periods of time, there was a theory that said to buy on bearish markets and to sell on bullish markets, taking market valuation into account (through the PE). Graham explains that while this idea is not bad, one can never truly know how the market is going to behave in the future. The bullish market between 1949 and 1969 put this theory to the test, because there was no serious market correction during this period. Not buying a single share for all that time would not have been beneficial to portfolio performance for any investor.
The moral of the story is that it is better not to buy just any old share. Whatever the market conditions, you need to be selective.
A serious investor cannot allow himself the right to think that short term market fluctuations, say over a few months, made him richer or poorer. However, most of us tend to become torn between the following emotions if a share price rises: “I am richer than before! Perfect! “, or “The price is too high now! I need to sell! “, or again “I am kicking myself for not buying more when the price was cheaper! “, or yet again “I need to buy more because everything is going up and this is a bullish market! “.
To combat these emotions, Graham recommends learning how to invest mechanically on the stock market in shares that are being traded below or at a price similar to the value of the tangible assets of the company in question. We can also take other criteria into account, such as a reasonable PE.
Graham demonstrates a very telling example, that of the company A&P:
A&P was introduced to the stock market in 1929 and the share price reached $494. In 1933, the price fell to $104. In 1938, the price fell to $36 during the bearish market. This price was truly extraordinary because the company sold for 126 million while the value of its current assets was 134 million (including 85 million in cash). And yet, A&P was the biggest chain of stores in the USA at the time. Despite this, Wall Street considered that the business was worth more dead than alive! Why so? There were fears about special upcoming taxes for corporations of this kind, and dividends had fallen that year. Furthermore, it was a bearish market. The first reason was an over-exaggerated fear, which had no valid base, and the other obstacles were temporary.
Let’s suppose that an investor bought A&P in 1937 for $80, for 12 times its average profits per share over 5 years. You can hardly say that the drop to $36 would not affect him. However, the right attitude in his case would have been to check meticulously whether he had not made a mistake in his calculations, and once he arrived at this conclusion, he could easily have ignored market fluctuations. What’s more, if he had funds and the courage of his convictions, he would even have strengthened his position at a low cost.
In 1939, the share price went up to $117.50. There is nothing extraordinary about this change in price; in fact it is very common. However, in the case of a well-known company like A&P, the phenomenon was truly striking. In 1961, A&P shares reached $705, 30 times the profits of the company in 1961! So, there were very high expectations in terms of growth for this well-established company. If we look at the previous changes in profits, nothing could justify such expectations. In 1970, the price went to 215, then to 180 in 1972, the year in which A&P experienced losses for the first time. A&P was certainly bigger now than in 1938, but it was neither favourably valued nor was it as well managed.
There are two lessons to take away from this: the market is often wrong and the intelligent investor can take advantage of this.
An investor is never obliged to sell his shares to cover his losses. He must learn not to take market fluctuations too seriously in order to succeed.
Chapter 9: Investing in Investment Funds
Graham studies the performance of investment funds and notices that the majority of funds do not do as well as the stock market generally. The managers are not to blame because they have so many funds to manage that their portfolios are difficult to differentiate compared to a wider index such as the S&P 500.
Graham also compares open funds and closed funds of his time and concludes that it is generally of more interest to buy closed funds at a price that is 10 to 15% lower than their net assets.
The other funds he mentions from his time are not really worth it.
Chapter 10: The Investor and His Advisers
Contrary to preconceived notions, an adviser can under no circumstances guarantee his client that he will have a better return on his investment than on the market in general using his services. An adviser can only rely on his experience to prevent the investor from making irreparable mistakes; whether it is a friend, an amateur or a professional.
Major investment consulting firms generally do a very good job at this and make no big promises in terms of return on investment. Brokers have a conflict of interest when they issue recommendations because it is in their interest to push their clients to speculate: it is therefore essential to be sure that the analyst at the firm of brokers you work with is turned towards value investment before taking his or her advice. You must also be cautious about the advice given by the investment banks, as it is in their interest to sell their services to you. The investor should therefore add his own judgement to their recommendation.
Whatever adviser he chooses, the investor should be sure about his or her integrity and professional skills before beginning to work together. This work comes at a price and you cannot expect much to come of free advice.
Chapter 11: Security Analysis for the Lay Investor
An analyst is interested in the past, the present and the future of the underlying company that has shares or bonds. He looks at the business, the operating results, the financial solidity, the weak points and strengths, the possibilities and the risks. Finally, he offers a recommendation about whether it is time to take a position.
In the past, analysts rarely applied security standards to shares in the same way as they did for bonds. Mathematical analysis techniques applied to shares are concentrated, in a very paradoxical manner, almost exclusively on the future, even though this is precisely the one thing that we can have no certainty about! What good is rigorous mathematical reasoning that has every chance of being false due to poor hypotheses?
How to analyse a company bond
It is very simple: just look to see if the annual cost of interest is sufficiently covered by the company profits on average over a certain number of years, for example 7 years. Another valid technique is to restrict yourself to the lowest profits over the period, to add a little pessimism to the approach and thereby increase the security of the investment. For this last criterion, simply take a net profit / cost of interest ratio of 2.1 times for an energy supplier, 2.65 for railway undertakings, 3.2 times for industrials, and 2.65 times for retailers. You can also look at the size of the company and the value of its assets.
The future holds no guarantees, but extensive experience demonstrates that these standards allow you to face all kinds of uncertainties and recover your investment.
What to do when it comes to shares
Graham shows, relying on the example of the famous review Value Line, that analysts who project the future are wrong most of the time. This method does not pass the gold standard for a lay investor. You are recommended to base things on the past and not to look at long term future perspectives except in a very general way. You can also look into management and what it has accomplished and financial health, as well as longevity and the current rate of dividends.
For growth companies, Graham gives a formula to estimate their value in a conservative way:
Value = Normalised current profits x (8.5 + 2 x annual expected rate of growth)
You have to be extremely conservative in your estimate of the annual expected rate of growth over 7 to 10 years. Using this formula also lets you determine the expected market growth of the market of a given company, by replacing the Value with the Market Price. This allows you to determine whether expectations are too high. For example, in 1963, the market reached annual growth in profits of 32.4% for Xerox, while it predicted just 2% per year for General Motors. This did not stop Xerox from responding to expectations right up until 1969.
Chapter 12: Things to Consider About Per-Share Earnings
Per-share earnings announced by companies may not correspond to reality. A company may well announce profits that do not take into account expenditure that known as “special”. For example, ALCOA announced earnings of $5.20 per share in 1970, down from $5.58 per share in 1969. During the last quarter of 1970, it showed $1.58 against $1.56 in 1969. You could say that this is not so bad, considering that 1970 was a recession year for the sector.
But if you look at the bottom of the page of the annual report, you will notice that the earnings per share totally diluted after special expenditure were $4.19 per share for the year and $0.70 per share for the final quarter.
To get an idea of the actual earnings, you first need to take the earnings that are totally diluted, in other words, related to the number of shares that would be in circulation if all the options and all the warrants in circulation were exercised. This problem is not substantial at ALCOA. Next, you need to take a look at these famous special expenditures. Looking at the footnotes of the annual report, we can see that these costs are associated with future production site closures and the credit branches, as well as the cost required to take a contract to its conclusion.
Can we really state that these costs are exceptional? It seems quite normal that a company as big as ALCOA would reorganise regularly and take its contracts to their conclusion. Isn’t this more like real cash outlay that is potentially recurrent? Should the results announced only include profitable operations every time and exclude the non-profitable ones?
In order to take all this into account, Graham recommends that a lay investor only consider the average earnings over a relatively long period of time. In the same way, he advises, when you want to take growth into account, relying on long periods in the past, for example 10-12 years, rather than on recent spikes in growth.
Chapter 13: A Comparison of 4 Listed Companies
Graham compares 4 listed companies. Two of them – Eltra and Emhart – have respective PE of 10 and 11.9 and a PB (Price to Book value) of 1 and 1.22. They respectively pay 4.45 % and 3.65 % in dividends. On the other side, we have Emerson and Emery which respectively have a PE of 30 and 38.5 and a PB of 6.37 and 14.3. They respectively pay dividends of 1.78 % and 1.76 %.
All of the companies are in good financial health (little debt) and have profits that have been experiencing growth over a long period of time. Emery is the only one that grew very quickly, while Emerson has slow growth.
Analysts at the time found that Emerson and Emery showed more promise than the other two.
Graham does not attempt to make any predictions about the performance of these stocks, but he does say that Eltra and Emhart present all the elements required to offer them a place in the portfolio of a defensive investor, in other words:
- Adequate size
- Good financial health
- Uninterrupted payment of dividends for the past 20 years
- No losses over the last ten years
- Growth in profits in excess of 33% over the last decade
- Share price lower than 1.5 times the price of their net assets after debt
- Price lower than 15 times their average profit over the past three years
Chapter 14: Stock Selection for the Defensive Investor
The defensive investor has two options: to either buy all his stock from one index, say the DJIA, or to choose his stocks himself, choosing only those that combine all the necessary elements, as given in the previous chapter. He generalises a few points: the profits must be relatively stable and the price paid to acquire the profits and the net debt-free assets must be moderate.
Applying these criteria to all of the DJIA stock, Graham only found 5 stocks that met his criteria. Remember that only a minority of shares on the market will remain open to you once you have applied these filters. Graham recommends a very quantitative approach to exclude any emotions that are involved in qualitative considerations.
The defensive investor must not try to choose the best stock from among the cheapest, because there is no reason why he would do that better than anyone else. Graham advises a diversified approach. Of course, someone who knows how to choose the best stock has no reason to diversify, but this is not generally the case with the defensive investor. The chosen criteria are not as restrictive as they seem, and in practice the defensive investor will have a sufficient number of shares to choose from to diversify according to his preferences and without feeling frustrated.
Chapter 15: Stock Selection for the Enterprising Investor
How should the enterprising investor choose his stock in order to obtain superior performance?
Taken together, professional funds do not manage to do better than the S&P 500: so there is nothing simple about it! The enterprising investor should therefore accept that he will be going against common practice on Wall Street to do better than everyone else. The good news is that the notoriety and the long term performance of the Graham-Newman funds demonstrates that this is possible.
These are the type of operations in which the Graham-Newman funds were engaged during their existence from 1926 to 1956:
- Arbitrage consists in simultaneously buying one instrument and selling one or several instruments against which the first instrument will be exchanged due to a restructuring, a merger or another similar kind of event.
- Liquidation: this involves buying shares in companies that are in liquidation, and whose shareholders receive more than the cash price paid at the outcome of the liquidation.
These two types of operation should have the following characteristics:
- A calculable return on investment higher than or equal to 20% per year,
- The probability of good progress estimated at more than 80%.
- Correlated hedging consists of buying convertible instruments and simultaneously short-selling the stock into which the instruments can be converted. The convertible securities were changing hands at prices close to par to allow the maximum loss to be reduced if it turned out that the convertible security did indeed need to be converted at the end of the operation. On the other hand, it generates profit if the stock falls more than the convertible issue.
- Buying net-net type shares, in other words, shares in companies that are trading below the value of the current assets released from all debt. Graham did not include fixed assets, such as factories, buildings, etc.… Graham and Newman bought them in a very diverse way and they had more than 100 in the portfolio of their funds.
Over time, Graham and Newman abandoned purchasing operations with companies that looked attractive but did not sell below their net asset value, due to a lack of satisfactory results.
Graham is reluctant to recommend his recipe to the lay investor, because these operations require experience in the business. However, he does suggest that the enterprising investor should try to choose stock based on the following criteria:
- Acceptable financial health, in other words, the value of the current assets is at least 50% higher than the current liabilities, and total debt does not exceed 110% of the value of the current assets (for industrial companies)
- Stable profits, with no negative result over the course of the past 5 years.
- Payment of a dividend
- Satisfactory growth in profits: the latest profits must be higher than those of 5 or 6 years ago
- Price lower than 120% of the net value of the tangible assets
Does a single criterion exist that can allow you to choose a good selection of stock? It would appear to be the case: Graham’s experience showed him that buying stock in big companies with low PE or buying a diverse group of net-nets allowed him to have very satisfactory results over long periods of time.
Chapter 16: Convertible Issues and Warrants
It is common to think that convertible securities are advantageous both for the investor and for the issuing company. Not only does the investor receive additional protection in the shape of a bond, he also contributes to an increase in the share price. Convertible securities allow the issuer to borrow at a lower rate of interest and to refinance its debt at the lowest cost by exchanging it for shares.
It is too good to be true: the investor often has to sacrifice an important element, which is either yield, or quality or both. What’s more, the company dilutes the existing shareholders, which has the effect of alienating them from part of their possessions – so that is the crux of the problem!
The conclusion about convertible issues is that they are the same as all other instruments: their nature does not guarantee that they will be attractive, nor that they should be ignored.Graham’s experience showed him that convertibles issues during bullish markets are often not very attractive. They need to be analysed on an individual basis. It may be intelligent to exchange a share for a convertible issue if the share pays much lower dividends than the convertible, and if the surcharge to pay to convert is minimal compared to the difference in the dividend.
Graham continues this chapter by tackling the question of warrants. He was opposed to the massive development of stock options which he considered to be a threat. Originally, these instruments were joined to bonds to play the role of a share conversion right at a given price. There were very few of in comparison with the number of shares in circulation and they presented no danger.
Now that they have proliferated, they can dilute shareholders massively: by default, a share has a lower value if there are warrants in the vicinity than if there are not. The more numerous the warrants, the lower the value.
Graham adds that the existence of warrants is their only crime. They can be studied in the same way as any other instrument on the market. We can estimate their intrinsic value and make a profit from them just like with any other instrument.
Chapter 17: Four Extremely Instructive Case Studies
Graham tells us the story of four extreme cases on Wall Street.
The first is the story of Penn Central, the biggest rail company in the USA, whose bankruptcy in 1970 shook the financial community to its core. The share price collapsed from $86.50 in 1968 to $5.50 in 1970.
However, an intelligent investor would never have bought this company’s stock or bonds for several reasons:
- In 1967, the expenses related to interest payments were only covered by 1.91 times by the profits, and by 1.98 times in 1968. The minimum cover recommended by Graham to invest in secure bonds is much higher for railway companies (2.65 times).
- The company had been declaring profits, but not paying any tax for several years.
- Penn bonds could be traded for much better quality bonds in the same sector that were selling at a lower price in 1968.
- Penn announced a $3.80 profit per share in 1968. The price of $86.50 corresponds to 24 times the profits announced. But any analyst worth his salt would have asked himself why they weren’t paying any taxes and would have questioned the validity of the figures announced by the company…
- In 1966, the company performed a merger-acquisition and announced profits of $6.80 per share, with an extraordinary charge of $12 per share which would be taken into account in 1971… This is a very doubtful profit.
- The operating performance of Penn was bad when compared to their competitors.
- And there were other shady transactions.
The second enlightening example is that of Ling-Temco-Vought Inc. (LTV). This is the story of a “young genius” that began in 1958. The company had turnover of 7 million, and in 1960 this figure was multiplied by 20, due to all manner of acquisitions. In 1967, the turnover was multiplied by 20 yet again. Meanwhile, the company’s debt went through the roof, from 44 million to 1.653 billion. In 1969, the company made another acquisition and the debt soared to 1.865 billion: at this point, LTV announced huge losses and the share price was divided by 7. One year later, the losses continued and the share price was once again slashed, this time by 4. LTV neverhad tangible assets and was nothing but a pile of debt: you may very well wonder how the banks loaned money to this company…
The third example is that of NVF, which acquired Sharon Steel, a company that was 7 times bigger than itself! The management of Sharon Steel tried to resist, but it was in vain. NVF took on colossal debt to make this acquisition… After the acquisition the balance sheet looked quite odd: deferred debt expenditure appeared in the assets column (since when does debt give money to shareholders?), the management of NVF had invented new accounting lines to swell the profits, etc.… In short, NVF had come up with all sorts of financial skulduggery to destroy the shareholders’ property.
The final example is that of AAA Entreprises. Another “young genius”, Mr Williams, decided to sell mobile homes. In 1965, he opened his business and had turnover of 5.8 million. He made pre-tax profits of $61,000. In 1968, he decided to create a franchise, so that other people could sell mobile homes with his name on them. He then had the clever idea to use his mobiles homes as tax return offices and created a subsidiary named Mr. Tax of America. He also franchised this concept. Before introducing AAA to the stock market, he increased the number of shares to 2,710,000. Then he found a big name that was prepared to do it.
In March 1969, they sold 500,000 shares at $13 each, including 300,000 sold under the name of Mr. Williams and 200,000 in the name of the company. AAA made $2,400,000 on the deal.
The share price promptly doubled and the company was valued at 84 million, against an accounting value of just about 4.2 million, and maximum profits of 690,000. The shares were therefore sold at a “modest” multiple of 115 times the profits. Quite an achievement for our young genius!
With this excess capital, in 1969 AAA opened a chain of floor covering retailers and acquired a manufacturer of mobile homes. In the following months, the company made losses of 4,365,000 dollars, in other words more than all of the cumulated profits and the 2,400,000 made from the deal… After that, the accounting value was no more than 8 cents per share! Despite this, the shares were still selling for $8.50, valuing the company at 25 million.
You might think that the investors would start to wonder how easily and quickly things could turn from a profit of $690,000 to a loss of over $4 million… but no. In 1970, AAA announced losses of one million, and Mr. Williams managed to avoid bankruptcy by negotiating a 2.5 million dollar loan.
In January 1971, he went bankrupt. Shares were still selling for 50 cents at the end of January, which meant that the company, which was nothing but debts, was worth 1.5 million!!! Sometimes speculators are incorrigible.
Chapter 18: A Comparison of 8 Pairs of Companies
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Pair 1: Real Estate Investment Trust (shops, offices, factories, etc.…) REI and Realty Equities Corp (property investment, general construction) REC
REI is a New England trust that has been managed in a very conservative way for over a century. REC is a company that expanded rapidly, and its assets exploded from 6.2 million to 154 million, while its debts exploded proportionately. Both companies were in good health in 1960, but poor management ruined REC in 1970.
Pair 2: Air Products and Chemicals (industrial and medical gas) APC and Air Reduction (industrial gas and equipment; chemicals) AR
These two companies were in similar businesses and the comparison is a typical one of analysis. APC was more recent than AR and in 1969, it had turnover that was half that of AR. However, APC sold with a PE of 16.5, and a PB of 1.65, while AR had PE of 9.5 and PB of 0.75. AR also had reasonable debt in relation to its shareholder equity compared to APC (shareholder equity / debt = 0.82 for AR and shareholder equity / debt = 0.32 pour APC). AR paid 4.9 % in dividends, while APC only paid 0.5%., which could be explained by the desire of APC to reinvest its profits in the company. In addition, APC had stronger growth in profits: + 59% from 1964 to 1969, against + 19% for AR. Over 10 years, APC profits increased by 362% and AR experienced a decrease.
If an analyst were to choose between the two companies, he would easily come to the conclusion that APC was a more promising prospect. But was APC a more attractive investment with its higher price? We cannot answer that question in a firm and definitive way. Wall Street tends to prefer quality over quantity, and the majority of analysts would certainly choose APC. Whether or not this choice is correct depends entirely upon an unforeseeable future. Graham tends to prefer AR in a diverse portfolio of shares of this type, because the speculative component is reduced by the relative price of the share.
In 1971, ARC shares performed better, but that does not mean anything in terms of the future.
Pair 3: American Home Products Co. (medication, cosmetics, household products, confectionery) AHP and American Hospital Supply Co. (distributor and manufacturer of hospital supplies and equipment) AHS
In 1969, these two companies represented two distinct segments of the health industry, a very profitable sector experiencing strong growth at the time.
The growth of both companies was excellent (no drop in profits since 1958), and the same was true of their financial health. AHS had better growth than AHP: + 405 % in 10 years against + 161 % respectively. But on the other hand, AHP had better margins and a better return on shareholder equity. AHP was selling at 31 times its profits and paid 1.9 % in dividends against 58.5 times and 0.55 % in dividends for AHC. You got more for your money with AHP on paper, but both companies are much too expensive to be chosen by an investor who decided to follow Graham’s precepts. Their price contained too many promises and expectations and not enough genuine performance.
In 1970, AHS had a microscopic drop in profits, and the share price dropped by 30 %. AHP profits increased by 8% and the share price rose slightly.
Pair 4: H & R Block, Inc. (tax handling services) HRB and Blue Bell, Inc. (production of work uniforms, overalls etc.…) BB
BB works in a very competitive industry, and has become the leader. Its profits fluctuated in line with industrial conditions, but growth between 1965 and 1969 was more than satisfactory (+ 68%). At the end of 1969, Wall Street was not very enthusiastic about BB, which traded with a PE of 11 (against a PE of 17 for the S&P 500 index).
HRB displayed incredible growth. In 1961, the company declared profits of $83,000 for turnover of $610,000. In 1969, its profits were $6.3 million for turnover of $53.6 million! And in consequence, this magnificent company was trading at 108 times its profits in 1969 (which was a record for HRB) and 30 times the value of its tangible assets (3 times more than IBM or Xerox, another record in terms of valuation).
It is true that HRB was twice as profitable as BB in terms of return on shareholder equity and that it had better growth, but BB was trading at less than a third of the total price (number of shares of the company multiplied by the price of one share) of HRB while its turnover was 4 times higher and it also had better profits.
An experienced analyst would have conceded that HRB offered excellent prospects. He might wonder why, with the return on shareholder equity, tax handling services were not becoming an extremely competitive field. But, conscious of the uninterrupted success of extraordinary companies like Avon Products in extremely competitive industries, he would have hesitated to predict a slowdown in the growth of HRB. His main question would have been to find out if the price to pay did not overvalue this business despite the excellent outlook. The same analyst would, however, have no problem recommending BB, as a good company that was also paying a very reasonable multiple of its profits.
In March 1970, panic on the market led to a drop in the price of HRB by 33%, and in the price of BB by 25%. But after the recovery, which lasted until February 1971, the BB share price had doubled compared to its price in 1969, while HRB had ‘only’ increased by 35%.
Pair 5: International Flavors & Fragrances (food additives) IFF and International Harvester (production of lorries and diggers, building machinery) IH
IH was a Dow Jones company, a household name, but hardly anyone in America had probably heard of IFF. And yet, IFF had market capitalisation in excess of IH (747 million against 710 million)! But in terms of turnover, IH was 27 bigger than IFF. Three years previously, IH profits were greater than IFF sales. But IFF was more profitable and had bigger growth, so it was the darling of the market. IFF was selling at 55 times its profits, while IH sold for just 10.7 times its profits.
The success of IFF was founded solely on its organic growth; it was an extremely well-managed and profitable company. The operational performance of IH raised some questions, on the other hand: How could such a big company be so unprofitable in relation to the capital invested in it by the shareholders? Profit only represented 5.5 % of IH’s shareholder equity.
Graham advises against including either of these companies’ shares in the portfolio: IFF is over-evaluated for a conservative investor and IH is too mediocre in terms of profitability, even at a low price.
In 1970, shares in IH dropped by 10%, probably thanks to its already low price. Shares in IFF fell by 30%.
Pair 6: Mc Graw Edison (public services and equipment) MGE and Mc Graw Hill (books, films, learning systems, newspaper and magazine publishing, ’information services) MGH
In 1968, MGH had market capitalisation that was twice as high as that of MGE. This may seem surprising because MGE had turnover that was 50% higher than that of MGH. In terms of PE, MGE’s was 15.5, while MGH’s was 35. The icing on the cake was that MGE’s growth (+104% over 5 years) compared favourably with that of MGH (+71 % over 5 years). And recently, MGH profits had taken a dive. This phenomenon appeared to be mainly due to the fact that publishers were very much in vogue on Wall Street in 1968.
MGE appeared to be quoted at a reasonable price in relation to its performance on a market that was very high in 1968. Due to this, its shares deserved a place in the portfolio of an intelligent investor.
The decline in profits at MGH continued until 1971. Mid-1970, the share price represented just a quarter of the price in 1968. Mid-1971, it represented 60%, after a recovery in the share market price. MGE also suffered, but there was no comparison: the drop in mid-1970 was almost 50%, but the price bounced back in 1971 and rose slightly above that of 1968.
Pair 7: National General (a large conglomerate) NG and National Presto Industries (household appliances) NPI
At the end of 1968, NG was a conglomerate of businesses that did not have much in common with one another: chains of theatres, cinema production, TV production, financial savings and loans services, book publishing, to which you can add insurance, investment banking, recording, computer assisted services and property…
NPI also had a programme of diversification, but it was nothing compared to NG! The company began as a leader in pressure cookers and then diversified into household appliances.
NPI had an extremely simple financial structure (only shares), while that of NG had warrants (3 different series) and all sorts of convertibles. In short, plenty to dilute the shareholders.
Having said that, NG was selling at 69 times its profits, while NPI sold at just 6.9 times its profits. Meanwhile, NG had a low return on shareholder equity (4.5%) compared to an enormous return on shareholder equity for NPI (21.4%). NPI was even experiencing growth (+450% over 5 years and +600% over 10 years, 10 times higher than NG over 5 years). It is truly incredible to see that NG was much more expensive than NPI. Quoted at a ridiculously low price, NPI was the perfect recommendation for the intelligent investor. The advice about NG was to avoid it like the plague.
In 1970, NG continued its diversification, saw an increase in debt and declared losses: the share price now only represented 15% of its price in 1968.
NPI continued to grow in 1969 and 1970, but its share price was affected during the market correction. It fell by almost 50%: now the shares had a much lower PE of 4, and constituted net-net! The price went back up to its 1968 level over the course of the year, but the ratios remained incredible low. Sometimes, things simply cannot be explained. Graham tells us that if the investor can find a dozen similar companies, NPI can take a well-deserved place in a net-net portfolio.
Pair 8: Whiting (equipment for treating materials) W and Willcox & Gibbs (small conglomerate) WG
WG and W, or how in 1969, a company with the lowest turnover, the lowest profits and a value of net tangible assets lower (WG) than that of the other (W) was selling for 4 times more in terms of stock market capitalisation… You may ask whether Wall Street is really an institution that is governed by reason. W was selling with a PE of just 9.3, and WG’s was stratospheric (around 120).
WG was a leading company manufacturing sewing machines that had diversified spectacularly to become a mediocre company, whose profits had fallen considerably. Those of W grew by 354% in 10 years and remained stable for 5 years. This caused concern over future growth.
In January 1971, W’s profits fell by just over 50%. It was quite possible that the profits were simply a reflection of the general state of the economy, but the share price fell by 40%. At this price, the analysis showed that W was a perfectly acceptable idea for the enterprising investor’s portfolio, due to its moderate PE when considering the average profits over 5 years.
Over the same period, WG declared small losses in January 1971 and the share price was cut in 4. In February 1971, it had returned to two thirds of the price in 1969. At the same time, W increased by more than 50% in relation to its price in 1969. The new price was still reasonable, but not as ridiculously low as before.
In these 8 pairs, the relationship between the price paid and the value purchased was often disproportionate. It might be over-evaluated or under-evaluated. Graham strongly recommends that investors only take into account situations where, after minute analysis, they can state with confidence that the price is clearly lower than the value.
Chapter 19: Stockholders and Managements: Dividend Policy
In this chapter, Graham condemns what he calls the “sheep” attitude of shareholders who no longer have any involvement in the management of their company. It is as though shareholders have completely forgotten that they are the owners of the company whose shares they own, and that the management of the company is at their service. Graham invites shareholders to closely read any materials that are sent to them by their company and to contact their fellow shareholders when a situation appears to be dubious.
When it comes to dividends, Graham tells us that it seems legitimate to reinvest the profits of the company in its business for better growth. However, he informs us that this money is often dilapidated by the management. That is why he invites shareholders to demand a high rate of the profits to be paid as a dividend payment (for example 66%), or proof that the money reinvested effectively leads to a substantial increase in profits.
Graham also explains the difference between stock dividends and stock splits. The only purpose of a stock split is to establish a lower share price, not to distribute anything to anyone. The additional shares that you own after the split is issued do not correspond to any distribution of capital. A true stock dividend corresponds to the distribution of a real profit that has been accumulated recently. It corresponds to a stream of capital moving from the “excess profits” account to the “capital” account. The stock dividend has an enormous advantage for the shareholder in terms of taxes.
Chapter 20: “Margin of Safety” as the Central Concept of Investment
If he had to explain the secret of intelligent investing in just three words, Graham would choose: “margin of safety”.
All experienced bond investors know the importance of this concept: the former capacity of companies to create sufficiently large profits to cover several interest payments is a means of protection from disappointment in the event of a future drop in profits. As good pessimists, these investors do not wait for the company to start generating profits again as they did in the past, or more: if they were sure of that they would only ask for a very small margin of safety.
Can we transpose this concept to shares? Certainly, with a few adjustments.
There are cases where you can consider a share to be like a bond, especially when the company share capital is only made up of shares, and when the price of all the shares is lower than the amount of bonds that could be issued against the assets and the profits of the company. Let’s return to the example of National Presto Industries (NPI), which sold for 43 million in 1972. With 16 million in pre-tax profits, the company was well able to support the issue of 43 million in bonds by paying all the necessary interest. So the investor had all the safety of a bond and every chance of better yield. It’s the best of both worlds!
Under normal market conditions in which the above conditions are rare, the margin of safety resides in profit-making capacity (1/PE) higher than the yield offered by a bond. Let’s imagine that one share has the profit making capacity of 9% and that the bond coupon is 4%. The margin of safety is therefore 5%. Part of this excess could possibly return to the investor in the shape of a dividend.
Graham brings up the problem that under the conditions in 1972, the average profit-making capacity was far from 9%. Let’s imagine that a defensive investor manages to build a portfolio with an average profit-making capacity of 8.33% (PE of 12), and that 4% comes back to him in the shape of a dividend. In this case, he will have reinvested 4.33% in the business of the companies. When you have State bonds that pay 5 to 7.5% with no risk, the excess profit-making capacity appears to be too low to ensure an adequate margin of safety. That is why Graham considered that there were genuine risks for a diverse share portfolio in 1972. Of course, these risks could be compensated by the possibility of an increase in profits, and it may also be the case that the investor had no other choice than to take them.
But the risk of buying good quality company shares at a price that is too expensive, as real as it may be, is not the main reason for failure on the part of an investor. The principle losses for an investor are more likely to come from buying low quality shares under favourable business conditions. Buyers see current profits as the genuine capacity of a company to make profits: this is absolutely not the case, and the profits are simply exceptionally high at that moment. This is why it is particularly important to test the cover of the interest to pay and the dividends over several years.
It is also possible to invest in the shares of a company experiencing growth with a margin of safety. However, you will have to project the growth using extremely conservative hypotheses. The danger of investing in a growing company lies here: Wall Street tends to project phenomenal growth over a very long period of time, and this growth cannot be sustained. When the growth slows down, the investor who has paid too much finds himself with nothing.
The concept of the margin of safety is clear for net-nets, which are traded with tax relief on the value of their current assets. When you manage to have a diverse portfolio in such situations and you don’t know how to tell whether the future will be positive or negative through logical reasoning, the margin of safety of the portfolio is high. However, you should avoid a net-net for which you can demonstrate a high probability of bankruptcy, whatever the price. From experience, even a small decline in the profit-making capacity of such companies does not prevent them from performing well on the market.
The concept of diversification is strongly correlated with that of the margin of safety. If there is a clear margin of safety in any given investment, things may go wrong, because the margin of safety guarantees a better probability of profit over loss, but in no way does it guarantee that a loss is out of the question. Diversification plays the role of insurance and further reduces the probability of losses. Every conservative investor diversifies, and Graham sees in this the beginning of acceptance of the margin of safety.
The margin of safety is in fact the main difference between investors and speculators.
Graham once again recommends conventional investments in US bonds and in high quality shares for defensive investors. The enterprising investor could try out all the different possibilities, even in lower quality instruments, but he should always stick to buying at a very low price. Sometimes, a very low price means that you can cover the poor quality and make an excellent profit from the situation.
Graham concludes that the most intelligent investment process follows the attitude of a businessman as closely as possible.
Do not forget that the instruments correspond to a reality, that shares are nothing more than titles of ownership: you must therefore act like a responsible owner!
- Must know what he is doing and master his field;
- Must not let anyone else invest in the stock market on his behalf, unless he can supervise the performance correctly and has very good reason to place his trust in the integrity of that person and his capacity to do his job well;
- And must base his decisions solely on his calculations, not on his optimism;
- Have the courage to implement his knowledge and experience.
For the defensive investor, there is happily no need to implement all these qualities, on condition that he knows how to tailor his ambitions to his abilities and roll out his plan for defensive investments.
Obtaining satisfactory results is easier than most people believe. On the other hand, obtaining higher quality results is more difficult than it looks.
Book critique of “The Intelligent Investor”, by Serge from the blog Be Rich Corp:
In The Intelligent Investor, Graham explains three fundamental things:
- How to minimise the risk of irreversible loss of capital in the long term
- How to increase your chances of making money on the stock market over several years
- And how to better control your emotions, something that prevents many investors from reaching their maximum potential
The Intelligent Investor made an excellent impression on me for a number of reasons.
It changed my life because it strongly contributed to removing any concerns about my financial situation. It is one of the best books every written on the subject of investment, and it is the only one that goes into the question in-depth.
Since I read it, I have been rigorously applying the principles outlined in this book, with the exception of diversification, which I only apply when I find a sufficient number of under-valued investments and when I do not understand the business of the companies whose valuations seem attractive to me.
Therefore, I can tell you, from my own experience, that what Graham explains works perfectly well, even today. Even though some examples and some measures are dated (because the business sectors of companies have changed considerably since this book was written), the relevance of the behavioural advice remains current today. Perhaps more than ever. Doesn’t the Penn Central affair remind you a lot of the Enron affair? The example of NVF absorbing the huge Sharon Steel, doesn’t that remind you of AOL-Time Warner or the case of Alcatel-Lucent? And all these “Cloud Computing” or other new tech companies that are traded for astronomical multiples of their profits, don’t they remind you strangely of H & R Block in Graham’s day? And what about the big crash of 2008, at a time when the market PE was above 30? Does it really seem so surprising once you have read The Intelligent Investor?
“The more things change, the more they stay the same”. The reader should simply take into account the fact there today there are a number of companies that can no longer be evaluated intelligently on the net value of their current assets, quite simply because they no longer require a lot of capital in order to operate and generate a lot of profits. Examples of such companies are Microsoft, IBM or DELL. In Graham’s time, there was a majority of industrial companies that needed substantial capital to operate and it was very astute to value them on the basis of their tangible assets. The relevance of the PE ratio remains perfectly valid today, even for these new service companies.
The only disagreement I would have with the content concerns the conclusion about the example of National Presto Industries in chapter 18. I think that when you are lucky enough to come across a company of this quality trading at a lower price than its asset value, you don’t have to go looking for 10 other ones once you have satisfied yourself that it is under brilliant management. I think that it is extremely intelligent to concentrate a significant share of one’s capital in this company (indeed, Warren Buffett, who is known for not diversifying his investments, did so at the time).
We could intelligently apply this reasoning to Apple in 2003, and no other shares would have been needed in order to become considerably richer in 8 – 9 years (the share price was multiplied by more than 70 in the meantime, and Apple was trading below its cash value clear of its debts in 2003). I admit that you would need a lot of courage to take 100%, but in this case 10% seems to me to be too little. Anyway, why should you miss out on this dream opportunity just because you haven’t found several other companies in the same situation?
The ideas in The Intelligent Investor are simple and timeless: you should never pay too much for what you buy to avoid any nasty surprises, and take out insurance against disappointment with a considerable margin of safety. These days, we are bombarded by graphs and other so-called information every minute of every day. All of this is superfluous and can make the investor forget that stocks correspond to a share in the capital of a company and that bonds are loans that are granted to a company. These instruments correspond to genuine ownership and are important to the economy. The single fact that this book brings us back to these simple and fundamental realities and teaches us to detach from market fluctuations makes it essential reading for any serious investor.
Reading The Intelligent Investor’ is hard work, and sometimes laborious, but as they say: “No pain, no gain”! Investing your time in reading The Intelligent Investor will turn out to be your first value investment.
- Graham knows his subject inside out. He was a master in investment, who had exceptional results throughout his career.
- The Intelligent Investor helps us understand the difference between investment and speculation
- The book clearly defines the philosophy of value investment, used by most of the best investors in the world.
- The most important concepts of stock market investment are presented and handled in detail, in particular in chapter 8 on the subject of market fluctuations and in chapter 20 about the concept of the margin of safety.
- The concrete examples given add greatly to understanding the ideas expressed in the book. They are all very relevant.
- Following Graham’s advice to the letter will show you how to invest wisely in the stock market and avoid losing your money, and even how to significantly increase your wealth.
- It is a starting point towards other books that tackle concrete value investment strategies, like You can be a stock market genius by Joel Greenblatt or Margin Of Safety by Seth Klarman.
- The heavy and sometimes pompous style of writing can make reading the book boring from time to time.
- The Intelligent Investor is a difficult read for someone who is not passionate about the field or very determined to learn: it will not make you passionate about stock market investment by itself.
- You will not learn how to understand and analyse a balance sheet or a profit and loss statement in The Intelligent Investor. You will learn how to draw conclusions about the accounts once you have correctly performed your analysis. To temper this point, Graham announces from the start that the goal of the book is to teach us how to behave as investors, not to learn financial analysis. He handled the subject in another book on that specific subject The interpretation of financial statements.
- Graham does not bring up the concept of Free Cash Flow, despite the fact that it is the genuine benefit that a company shareholder receives and it can be very important in investment. On the other hand, he strongly insists that there can be a major difference between the profits announced by a company and its actual profits.
- Graham does not insist enough about the fact that at equal price, it is right to choose the company that has the best return on shareholder equity. He only mentions it in the example of International Harvester, which, although inexpensive, had a very low return on capital, and advises against it for that reason. The importance of quality is therefore partially avoided in favour of criteria of price throughout the book, even though Graham clearly knows the subject very well as is demonstrated by the example chosen. It is one of the keys to Warren Buffett’s success.
- The conclusion about the case of National Presto in Chapter 18, where I see no point in over diversifying.
- Before reading The Intelligent Investor you should already have an idea about the meaning of terms like stocks and shares, bonds, convertible securities and warrants (you can find this on the Internet, so it should not hold you back).
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