The Intelligent Investor

"By far the best book on investing ever written."

"This foundational text on value investing aligns with Jamie Dimon's focus on long-term financial strategy and prudent risk management at JPMorgan Chase."

"It was the best book then. There is more competition now. The idea is that you look at the underlying value of the company’s activities instead of relying on market gossip. In my book, I talk about two kinds of underlying investment strategies. One is to second-guess the market gossip and the other is to look at the underlying value of the assets you’re buying. My suggestion is that if you’re an ordinary punter, trying to do the first—the market gossip stories—is a mug’s game. Yes, though a lot of what Graham did was only possible in an era when you had boring, badly-run companies where the value of the underlying assets of the business were much greater than its trading value. Famously, Charles Clore bought half the shoe shops in Britain, not because he was interested in shoes but because these shops were trading out of premises that were far more valuable than the shoe businesses they were running. And no one had noticed. “If you go and see a doctor, you’ll have a reasonable expectation that what he or she proposes to you is in your best interest” That kind of strategy reached its culmination in the 1970s with Jim Slater. He was the most notorious of asset strippers but eventually, in the crash of ’74, Slater effectively went bust. By then most of these kinds of opportunities had been taken. I think the principal kind that remained were some badly-run businesses that had almost monopoly positions, so two or three companies—Hanson was the most famous of them—went around taking over businesses like London Brick and EverReady batteries. You bought them, cut some of the costs, put the prices up and made a profit that way. But even that kind of opportunity is now pretty rare. Not really. I think of private equity now as when it’s good, it’s very, very good and when it’s bad, it’s horrid. The worst kind of private equity—which is probably the dominant kind—is where you acquire a business, massage its earnings up for a couple of years, and then flip it on to somebody else. A classic illustration for me was staying in a hotel somewhere and thinking the carpet was not being replaced, the mini bar was ludicrously overpriced and breakfast cost far too much. This was obviously a hotel run by people who didn’t care if you came back and I thought, ‘This is a private equity deal.’ I checked afterwards and of course it was. Yes, the advice that you should look through to the underlying value, earnings and assets of the company remains valid. But the assets of Apple and Amazon are clearly very different from the assets of a shoe shop. Typically the assets of that older era were in real estate of one kind or another. Now they are in people. Not sensibly. People devote a lot of effort to so-called brand valuation and valuing other intangibles but, in a sense, you’re inventing a number to make the numbers add up: since the value of Apple is $800 billion—far above the value of physical assets and cash—we invent an asset to account for the difference. Warren Buffet has famously said that investors would have been better off if the Wright Brothers’ plane had crashed."