 Reading an author ’s early writing allows us to see juvenile attempts at expressing a message more fully developed in that author’s later works. Having read through the Intelligent Investor and Security Analysis a few times, reading Benjamin Graham on Investing was an interesting opportunity to do just this.
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 I wish I had found this book years ago. Fundamental Analysis when done right requires a thorough understanding of every line item in every financial statement- what is it, what ratios use it, and most importantly, what does it tell you about the business you are trying to analyze.
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As investors we are well advised to study the styles of those that are successful at our craft in the hopes that we may emulate them. Two of the most studied characters of recent memory are Warren Buffett and Charlie Munger. With their unparalleled returns the two have achieved almost pop culture celebrity status.
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Some years ago I was struck by how many false things I had believed, and by how doubtful was the structure of beliefs that I had based on them. I realized that if I wanted to establish anything in the sciences that was stable and likely to last, I needed – just once in my life – to demolish everything completely and start again from the foundations.
P. 1, Rene Descartes, Meditations on First Philosophy
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 Over Christmas I have had a bit of a chance to catch up on some reading, one of the books I read through was Garrett Gunderson’s Killing Sacred Cows: Overcoming the Financial Myths That Are Destroying Your Prosperity. In Gunderson’s book he suggests individuals look at investing in the same way that banks do as they have been so extremely efficient. As Gunderson puts it banks mitigate investment risk in personal loans by doing the following:
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We made it to the final installment of our Graham vs. Greenblatt series. Throughout the series we examined each of the ratios that Greenblatt recommended in his book The Little Book that Beats the Market. The final posting will look at how Greenblatt draws the ratios together and bring this all back around, so lets get into it.
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 Greenblatt in his book The Little Book that Beats the Market advocated a simple method for attaining substantial stock returns. In this series we are looking at the particulars of this investing theory to both understand why he advocated the elements of this theory and what Benjamin Graham would have thought of the approach that Greenblatt was advocating. The next part in this series looks at Return on Capital or ROC.
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 Joel Greenblatt is a modern value investor, his approach as we outlined in our previous post was to find value companies like Graham, but he also wanted a company that has potential for the future. The first set of criteria looks very similar to Graham.
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 Graham passed away in September 21, 1976 well before Joel Greenblatt graduated from Wharton in 1979 but a linkage between the two men’s investment theories is not difficult to find. Greenblatt during his time at Wharton went to great lengths to study the value approach that Graham had devised (there are stories that Greenblatt entered vast amounts of stock data by hand into a mainframe and then ran tests on it using Graham’s system). He saw the benefit that could be returned from purchasing companies that were inexpensive.
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The final page in our series on Graham’s investment theory is dedicated to dividends. I saved the best, and most contentious for last. Investors love to split themselves into groups- technical analysts, fundamental analysts, value investors, growth investors. In the same vein there are dividend investors and growth investors. Without further adieu let’s get into it.
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 The ratios we have looked at so far tend to be a snapshot of the current condition of the company and don’t really explore a company’s history. Graham didn’t believe in investing in the next hot company, he was about buying companies with history and tangible revenues; companies where the paint on the sign out front is dry- basically boring companies. Graham also wanted a company that had proved that it understood its business and was on a path to continued success.
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If you made it through price to earnings ratio, price to book ratio will be a piece of cake.
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 Book Value is a pretty easy one as compared to Price to Earnings. So let’s get into it we will need it for other calculations.
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 To follow up our Graham intro we will investigate Graham’s first insurance technique of buying on the cheap. Graham used a number of ratios to determine if a company is cheap. The first ratio we need to look at is the Price/Earnings ratio.
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Benjamin Graham had a great investment philosophy. Find great companies determine their intrinsic value and then only buy them when they are cheap. Or as Graham puts it:
apply a set of standards to each purchase, to make sure that he obtains (1) a minimum of quality in the past performance and current financial position of the company, and also (2) a minimum of quantity in terms of earnings and assets per dollar of price.
The Intelligent Investor P347-348 Harper Collins Edition 2003
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