SECURITY ANALYSIS - THE STOCK MARKET (BY BENJAMIN GRAHAM)

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The bible of value investing. This is the third part of my summary of Security Analysis - Benjamin Graham & David Dodd’s legacy to up-and-coming investors. Here, we’ll cover the stock market and stock exchange - how to find undervalued stocks.
Playlist of the full Security Analysis series: bit.ly/2vNzkw7
Top 5 takeaways from Benjamin Graham’s Security Analysis:
00:00 Intro
01:08 1. Finding undervalued stocks
04:13 2. Comparative analysis
09:37 3. Investing in stocks is the search for weakness
12:42 4. Buy stocks that are valued below net current assets
14:42 5. Timing the market
TL;DW:
- Use a comparative analysis or scrutinize individual company reports to find undervalued individual stocks
- When doing a comparative analysis, remember that only obvious disparities matter, and that it’s mostly a tool to quickly reduce the number of companies considered for investment
- The future is primarily something to guard yourself against- weed out weak companies
- Stocks valued lower than net current assets may represent true investment bargains, but you’ll typically only find them during distressed financial conditions
- It’s difficult to time the market. An all-in, dollar cost averaging strategy seems tough to beat.
My goal with this channel is to help you make more money and improve your personal finances. How to become a millionaire? There are many ways to get there - investing in the stock market, becoming a stock trader, doing real estate investing, or why not becoming an entrepreneur? But whether you are interested in how to invest in stocks or investing strategies for creating passive income with rental properties - I hope to be able to provide you with a solution (or at least an idea) here. Warren Buffett - the greatest investor of our time - says that you should fill your mind with competing ideas and then see what makes sense to you. This channel is about filling your mind with those ideas. And in the process - upgrading your money-making toolbox.

[@TheSwedishInvestor]

Playlist of the full Security Analysis series: bit.ly/2vNzkw7

[@newtonfefe]

Hello. What whiteboard animation software are you using in your videos?

[@edom9140]

Summaries after summaries of extremely important contents, clearly and entertainingly explained. Your doing a fantastic job for the investing community, thank you so much.

[@TheSwedishInvestor]

Edo M I'm very happy for this comment! Cheers man, best of luck to you and your investing success! 👍

[@edom9140]

@@TheSwedishInvestor, best of luck to you as well, looking forward to watching new videos about stock picking and value investing! :)

[@unknowninfinium4353]

Dude is dropping fire mixtapes one by one ;) Man really really thanks for this, it gets too technical at times but you managed to explain it easily and simple.

[@TheSwedishInvestor]

Glad to hear it akshay kumar! This is a tough one to be honest, not a beginner-friendly book. But it does have a lot of great insights.

[@rhysmartins8936]

One of your best videos yet , great job comparing real businesses. Keep it up man !

[@TheSwedishInvestor]

I'm glad to hear it Rhys Martins! 👍 Thank you for your support!

[@siggiAg86]

Great series!

[@groeisterk]

Thank you for great presentations. I do not have the patience to work through his books. I learnt so much!!

[@jeanpolice3044]

This part was very interesting !! ⭐ Worth 4 reads !! 💪💪

[@MrEaglenator]

Great video!

[@VykintasGlodenis]

Sooo good.

[@triphamminh2029]

Thank you so much!

[@tiagolimp]

Hahahah Best finishing ever, I clearly saw myself there!

[@zeyadal-awadhi4604]

thank you for showing the disclaimer

[@aminusuleiman9328]

Thanks the swedish investor... For ur highly understandable animations laced with some humour. I'm by far a better stock market saarvy person because of you. God bless you.

[@crystalchi1207]

thank you

[@worldgamingseries3155]

By price to equity you mean price to book value right? Great video! Keep it up man!

[@TheSwedishInvestor]

Yes indeed, just two ways of expressing the same thing 😊 Actually I think Graham preferred your way of saying it 👍 Thank you!

[@GanpatiRam]

Thank you❤👌

[@TheLiar888]

Amazing work ! What about a video about Michael Mauboussin’s work next time ? His paper about moat is great

[@TheSwedishInvestor]

Has he written any books as well? I may do papers in the future as well though, but I don't have plans for it currently.

[@AdA-rl4eo]

Benjamin Graham has a very deep voice 😜 great content 👌

[@TheSwedishInvestor]

He must have authority you know .. 😁

[@sergiveramartinez2685]

When it comes to takeaway number 4, I think nowadays there barely companies that have a positive NCAV nor even a positive NAV compared to decades ago. I know this book was written roughly 80 years ago but what could be the reason for that? It has been a change in how companies present their balance sheets? For example, nowadays companies such as AAPL, KO, MCD, and many others don't fulfil these criteria. Thanks and great content!

[@janfrancismedardgodisan4390]

It kills me every time he does that voice change when quoting another person lmao. Keep it up, man! You've quickly become one of my favorite channels on KZbin

[@maalikserebryakov]

It kills me too. I barely recover from the cringe

[@wellyatomy9472]

Nice

[@shubhambahety807]

Amazing mazing

[@NdRsxd]

thank you very much for your videos swedish teacher of investing Do you check the companies in comparative analysis by yourself? or do you use some kind of program to automaticly deal with this?

[@TheSwedishInvestor]

Thank you for the support NdRsxd! There are many stock market screening tools out there that can help you with this. Here's a suggestion: Expensive one: CapitalIQ. Cheap one: QuickFS. Free one: Yahoo Finance

[@tensevo]

18:40 Goooooo Anthony Time in the market v Timing the market

[@167et]

Thanks for the great video Erik! Just to be rigorous, did you do that backtest of those 5 investing strategies and come up with the graphs?

[@TheSwedishInvestor]

Cheers 167et! Yes, I did the backtesting and the graphics, so if there's anything that's unclear, just ask 👍

[@167et]

@@TheSwedishInvestor Impressive, would be wonderful if you can share it on github.

[@TheSwedishInvestor]

@@167et I can send it to your e-mail if you wish to have a look at it :)

[@167et]

@@TheSwedishInvestor [e-mail] Thanks man!

[@karanwattamwar6395]

@@TheSwedishInvestor i wanna know too man! Incredible content ! [e-mail]

[@rickvanwichen]

Hi, I'm loving your videos! I'm very new to investing. I have a question. So whenever you perform a comparative analysis, do you always use the same metrics/ratios to compare companies to one another or is this industry dependent? If not, how do you determine which metrics/ratios to use? I'm a bit stuck here haha

[@TheSwedishInvestor]

Hi Rick! Great question. It is definitely industry dependent, but there are some general ones you can use too. I like the PE, EV/EBIT, RoA, RoTA, Earnings growth per share and CAPEX/EBITDA primarily I think. Regarding how to determine which ones to use for a specific industry, there's really no short-cut. Perhaps you can google and hope for an answer, but it boils down to industry understanding at the end of the day.

[@rickvanwichen]

@@TheSwedishInvestor Thanks for answering my question! I appreciate it, great channel!

[@_Mute_]

TSI back at it again with another banger! This time at 21k subs! I've already 2 bagged my way towards this 10 bagger of a channel. Question. The research you present, such as the different timing strategies example you put forth. Do you do all this on your own? Or do you have a secret source that you pull from. I see in another of your replies that you did your own backtesting. Is there a comprehensive and intuitive source you go to for this? Or is the only way to complete it is to sit down and do the dirty work from scratch? Seems it would take nearly forever if so.

[@TheSwedishInvestor]

YOUsernameism hey man 🙌 My secret source in this case is multpl.com, but unfortunately they only provide you with the raw data. You need to apply strategies to it yourself to see how it turns out. I like doing these types of analysis myself though, because it makes it easier to be a contrarian and to stick with your decisions. That goes for all types of investments for me. If I do the analysis myself, I can whether the storm and stick to my initial hypothesis if it turns out to be a bumpy ride 😉 which it typically does ..

[@_Mute_]

@@TheSwedishInvestor Ah I see. I've used multpl.com to keep an eye on the Shiller-PE, but I guess I should dive a little deeper into what else they provide. I prefer the raw data, that way you can do what ever analysis you want and you know exactly how it has been analyzed, as statistics are extremely easy to manipulate to fit any hypothesis you want (whether intentionally or unintentionally). The down side is that it is also easy to accidentally misuse your own statistics by accident if you are not careful. You should see me spreadsheet of U.S. federal bonds. 65,000 individual data points dating back from 1990 😅

[@TheSwedishInvestor]

Love it, very ambitious 🙌 Definitely agree regarding the part about statistics being able to fit to any hypothesis, you have to be very careful so you don't fool yourself

[@TheStrafendestroy]

As far as industry specific values what are some good ways of finding them in each industry? Also once you find the values you should focus on how do you apply a number to them; perhaps getting an average of the top 100 or 50 companies in that industry?

[@TheSwedishInvestor]

There's no one way to do this. I'd ask someone who knows the business well, and/or look at annual reports and see which figures that public companies usually focus on. Which ratios do they set up goals for? Yes, you could compare it to industry averages if you have the data for it. You could rank them 1,2,3,...100 and attach "points" to that. Many ways of doing it, but these are some suggestions.

[@johneng6534]

Bra och intressant video, speciellt vid 9:24! Jag har några frågor; Vilka är de böckerna som har influerat dig mest? Jag själv swingtrade:ar och är det något du gör? eller satsar du bara på långsiktiga investeringar?

[@TheSwedishInvestor]

Tack så mykcet, roligt att höra! 😁 Haha det är antagligen två svenska böcker som influerat mig mest, som jag inte har sammanfattat här på kanalen ännu. Den första var den som fick mig att komma igång med investeringar - "Vägen till din första miljon." Den andra är en bok som är svår att sammanfatta eftersom den i sig själv utgör en sammanfattning - "Världens 99 bästa investerare" heter den. Jag kör inte särskilt mycket trading alls faktiskt, har bara gjort det i några enskilda specialfall. Jag är sugen på att bygga upp ett tradingsystem men som det ser ut nu så har jag andra saker som jag vill prioritera före, och ordentlig back-testing tar sin tid tyvärr ...

[@jameskurniawan1016]

How do you know about the industry specifics? i dont understand about what to compare in each industry

[@madhan-adavani]

Hi, How do we actually get better at analysing a business/stock or interpret the financial statements? I always had this doubt. I would be glad to hear any tips or suggestions regarding this? Thank You 👍

[@TheSwedishInvestor]

Hey Madhan Adavani! 1. If you have someone, a relative or a friend or similar, who has a long-term track record (10y+) of good returns, talk to them. This is not an option for most people, but if you have it - take it. 2. Second best would be to read about people who have been successful in the markets and try to emulate their strategies. 3. Try these strategies out yourself and write about your decisions. When you buy a stock, write down at least 5 reasons for buying it and 3 dangers with investing in it (don't miss this!). Then, when you decide to sell, write down why you sold. This type of "diary" will help you improve your investing game over time. 4. Read about individual companies. It could be as simple as just going through the Fortune 500, or you could pay for a report about companies from something like Value Line. 5. Keep yourself updated on events which will change the outlook for your portfolio companies. This often means reading a business newspaper such as Barons, Economist, Bloomberg etc. Most of the information is noise and useless, but sometimes there's useful stuff there.

[@ah4374]

Around 6:18 you said all the companies pass Graham's test, where did you find what Ben Graham's criteria was? Was it all in Security analysis? Love the videos by the way thanks for the help

[@mandelsondelacruz8915]

How do you get industry specifics ratios?

[@ossamamoussa4457]

Common Mistakes When Trading stock market. Enter too early, very often traders do enter trades prematurely.They don’t have the patience to sit and wait and that usually costs them dearly. To become a consistently profitable trader, one needs to master the skill of IQD Momentum system....,Exit too early :the opposite mistake of the one before is exiting a trade too early. There is a saying by Lukasz Wilhelm that you need to cut your losses fast and let winners run as long as possible.

[@TheEmolano]

I will admit that I expected the 50-50 Francis to do better. This strategy of dinamic allocation just makes a lot of sense. Maybe a 70-30 Bob would have done better? Btw I wish this simulator would have been done first day of every month instead of every year.

[@Larry82ch]

I really like this channel, binge-watching it since a couple of days! So me being a bit confused isn't supposed to sound mean, I'm just curious: Concerning "Timing the Market" (number 5): All-in Anthony supposedly "never sells". But since this is "investing in the S&P 500" there are companies dropping in and out of this index all the time. Which means, he actually HAS to sell his companies at least as soon as they become less valuable. So by definition he always SELLS LOW. How can he be still on the top of the heard then?

[@vtotti2]

you said, there are companies dropping in and out, so he is selling low the ones dropping out, but is buying low the new rising companies too so they compensate each other.

[@Larry82ch]

@@vtotti2 Makes sense. Thanks!

[@ThomasBarrios]

Man... “Bonds??! I rather stuff money in the mattress!”.... LOL! 🤣 That was great!

[@Heinrich2awsome]

How do you find the data for number two?

[@Shat2002]

Any idea why in the disclaimer (timed at 15:50) you mentioned that all the interpretations of all the books are poor? This threw me off and ringed a BIG alarm about the contents legitimacy. I hope my interpretation is wrong! Thanks

[@TheSwedishInvestor]

Heh, it's a very vague reference to the South Park disclaimer that they use before each episode. I hope that the interpretations are not seen as poor, at least I try my best for them not to be :)

[@GregBelote]

Great video, I've really been enjoying your collection recently. I was wondering if you had any videos (or book recommendations) related to security analysis in specific industries, such as retail. You mention industry specific metrics (e.g. inventory turnover) and I've seen others talk about metrics like comparable sales or sales per square foot. What's the way that you recommend go deep and study an industry?

[@jr2815]

Didn't Fast Retailing (UniQlo) increase its inventory levels (presumed to be a bad thing) because it kept running out of stock?

[@karanwattamwar6395]

I am new to investing. Though this content helped me underdtand a lottt but to really start investing, i need thorough understanding of the book which i aint able to do. Any pre-requisites suggested are appreciated😁

[@randombanana640]

well he made a seven book list from easiest to hardest. (But i think you need to learn basic financial statement like income statement, balance sheet, cashflow statement, and generally how stock market works) They are: The little book that beats the market One up on wall street University of Berkshire Hathaway Uncommon stocks and uncommon profits the Intelligent Investor Essays of Warren Buffett Security Analysis

[@booksbrains1249]

Are you a finance student ?

[@freesancocho]

Inditex should purchase PVH group

[@gyanvistaar655]

Net current assets= current assets minus current liabilities not all liabilities. Correct me if i am wrong

[@TheSwedishInvestor]

It's the net after all liabilities are deducted 😊 So, current assets - liabilities. The reason why you look at this is to be able to determine who much a price is worth if the shareholders decide to close down the operations. Current assets can almost always be sold at their listed balance sheet value, so they represent a more careful way of assessing how much the assets of the companies are worth, than if you would include all assets. Before a company can be liquidated though, it has to pay back all its liabilities, not just the current liabilities.

[@karanwattamwar6395]

@@TheSwedishInvestor 👏 👏 lucid explanation

[@thor-philipjacobsen4819]

How do you calculate those financial ratios? Do you have have a video showing how to do it?

[@breadwinner7438]

Invest in a secure platform and broker where you will not lose your funds. I'm new to trading, but I met Mr. Raini Titan here on KZbin where he teaches people to trade forex and stocks. which he guides me with a super platform and amazing strategy. I thought it was a scam, but finally I cashed my first $ 57,000 profit last week, he is very reliable and honest, he always tells me the actual time of buying and selling with 100 profit from his one-on-one master training.....Stay bless

[@breadwinner7438]

[e-mail]))

[@maalikserebryakov]

@@breadwinner7438indian

[@fedorgalkin5018]

All-in wins, I got that. See you in 50 yrs

[@andrewwoods2343]

What does it mean when current ratio is 3,8x? - What does the 3.8x indicate. I see that you put your numbers in %. E.g. quick ratio = 147%. I am looking at TIKR.

[@1ANRS]

Current ratio means how much current assets outnumber current liabilities. So 3.8 means that the company has 3.8 current assets to each 1 of current liability. I'm not sure you would put it into a %, certainly I don't and I've not seen it. Industries differ (e.g. supermarkets can afford to have a lower current ratio as they will have a much quicker turnover of stock than, say, a luxury furniture maker) but generally a ratio of 2:1 is seen as a good current ratio. EDIT: OK, I see what you mean, he used it as a % and I'm not sure how that would translate. Should have watched the whole video before commenting!

[@george6977]

Come on, the disclaimer flashed up and disappeared immediately before I could read it.

[@sanyofilin3622]

9:35

[@jamieduke9550]

99

[@IrineuEvangelista]

There is a massive bias in all backwards looking "buy everytime you can" strategy, such as this "all in" anthony and lynch's lessons If you actually "all in" anthony your way starting just before a crash, your long term trend would much likely be the worst.

[@maalikserebryakov]

Nope. Stocks have the best return. As long as you don’t make mistakes.

[@AmatriceBand]

I don’t see any difference in Edward’s and Betty’s strategy. Am I missing something ? It’s so ironic that Anthony wins. Suggests that he didn’t have to do p/e analysis at all 😅. And sell when intrinsic value has reached.

[@TheSwedishInvestor]

Hey man! Edward invests in stocks when their P/E is low compared to average historical rates. Betty invests in stocks when their P/E is low compared to historical prices of bonds. So they buy stocks based on different indicators - Edward bases it on stock prices and Betty on bond prices. I hope that makes sense, cheers :)

[@AmatriceBand]

@@TheSwedishInvestor thanks Swede man 😅

[@senpaicatz8124]

I dont know why im more into value investing even all of my peers like trading... Btw, just 17 yrs old here who was interested on investing and business🙂

[@kylen6430]

Because trading is “sexy” while value investing is more equivalent to the “dad bod” of finance

[@TheSwedishInvestor]

Hahaha true thing Kyle Neese 😁 Trading is being marketed much more than value investing these days, which probably has boosted its popularity

[@TheSwedishInvestor]

Senpai Catz that is wonderful! Keep that interest up! 👍

[@shelly7108]

Diversifiera din finansiella portfölj med Bitcoin - bit.ly/2X2eNAz

[@user-td2sm8wz1v]

part 4 for boomers

[@bonk841]

thank you

[@TheSwedishInvestor]

🙌