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tate bonds and, 217 Congoleum Company, 684, 691 Congoleum-Nairn, 684 Congress Cigar Company, Inc., 316 Consolidated Edison Company of New York, 94, 244n, 444n Consolidated Gas Company of New York, 94, 444n Consolidated Oil Corporation, 466n, 635 Consolidated reports, 443–452 allowance for nonconsolidated profits and losses and, 445–446 degree of consolidation and, 444 earnings distortion by parent- subsidiary relationships and, 447–449 former and current practices and, 444 special dividends paid by subsidiaries and, 447 subsidiaries’ losses and, 449–452 Consolidated Textile Corporation, 314n Consolidated Traction Company of New Jersey, 227 Contagion, real estate bonds and, 217 Continental Baking Corporation, 480, 652 Continental Can Company, 91, 461 Continental Motors Corporation, 523n Continental Oil Company, 468 Continental Steel, 245, 663–664, 666 Convertible issues, 313–322 combination with stock purchase, 321 convertible at option of company, 319 convertible into other bonds, 320 convertible into preferred stock, 318–319 delayed, 321–322 dilution and, 313–315 with original market value in excess of par, 320–321 price behavior of, 306–307 sliding scales to accelerate conversion and, 315–318 Corn Products Refining Company, 160n, 201n, 606, 607, 611–613 Corporate pyramiding, 644–653 alternative methods of creating speculative capital structure and, 652–653 evils of, 647–651 holding companies not guilty of, 651–652 legal restraints on, 652–653 Corporation Records Service (Standard Statistics), 93n Costa Rica, 175 Cottle, Sidney, 123 Coty, Inc., 485 Coudersport, PA, 274 Counsel as investment advice source, 261 Court-Livingston Corporation, 113n Cowles, Alfred, III, 362n, 527n Cox Communications, 274 Cram’s Auto Service, 57, 95 Crash of 1929, Graham’s position and, 16 Credit default swaps (CDSs), 622 Credit risk, Oaktree Capital Management investment methodology and, 132 Critical Path, 267 Crucible Steel, 330 Cuba, 175 Cuban Atlantic Sugar Company, 584n Cudahy Pa
(Standard Statistics), 93n Costa Rica, 175 Cottle, Sidney, 123 Coty, Inc., 485 Coudersport, PA, 274 Counsel as investment advice source, 261 Court-Livingston Corporation, 113n Cowles, Alfred, III, 362n, 527n Cox Communications, 274 Cram’s Auto Service, 57, 95 Crash of 1929, Graham’s position and, 16 Credit default swaps (CDSs), 622 Credit risk, Oaktree Capital Management investment methodology and, 132 Critical Path, 267 Crucible Steel, 330 Cuba, 175 Cuban Atlantic Sugar Company, 584n Cudahy Packing Company, 129, 148–149, 460n Currency risk, 716–717 Current-asset value, 553–554, 559–574 liquidating value and, 559 realizable value of assets and, 560–562 stocks selling below liquidating value and (see Sub-liquidating value common stocks) Curtis Publishing, 689n Cushman’s Sons, Inc., 450–451 Czecho-Slovakia, 175 D Daekyo Corp., 51 Davis, William Milton, 275 Davis Coal and Coke Company, 529n, 532n, 568, 584n Dawes Loan, 173n Dawson Railway and Coal, 320n Day v. United States Cast Iron Pipe and Foundry Company, 198n De Telegraaf, 719 Debenture, 147n, 148 Debt: intercorporate, 596 large, as sign of weakness, 594–596 Deeds of trust, 229 Deferred charges in income account, 431–433 Deficits, earning power and, 480–481 Delaware and Hudson Railroad, 208n Dell Computer, 347 Denmark, 174, 175 Department of Commerce, 98 Depletion of oil reserves, 465–467 Depreciation, 453–463 balance sheet–income account discrepancies and, 455–456 bases for, 454–456 concealed, 461–462 excessive, concealed by accounting practices, 462–463 failure to state, 463 mark-downs to reduce, 455 mergers and, 461 rate of, 456–463 Depression: bonds as investment and, 154–164 fixed-value investing in, 258 Great Depression, ending of, 1 Derivatives market, 622 Descriptive function of security analysis, 62 Dewing, Arthur S., 220n, 308n, 680n Dickens, Charles, 269 Dilution, convertible issues and, 313–315 Discount on bonds, amortization of, 433–434 The Discovery Company, Ltd., 100n Disney, 402 Distilling Com
ed by accounting practices, 462–463 failure to state, 463 mark-downs to reduce, 455 mergers and, 461 rate of, 456–463 Depression: bonds as investment and, 154–164 fixed-value investing in, 258 Great Depression, ending of, 1 Derivatives market, 622 Descriptive function of security analysis, 62 Dewing, Arthur S., 220n, 308n, 680n Dickens, Charles, 269 Dilution, convertible issues and, 313–315 Discount on bonds, amortization of, 433–434 The Discovery Company, Ltd., 100n Disney, 402 Distilling Company of America, 209 Distressed investing, 265–268 case study of, 280–283 examples of coups in, 270–283 in fallen angels, 284–285 safety margin and, 268 types of bankruptcy and, 269–270 (See also Bankruptcy) Dividends: changes in, market exaggerations due to, 679–683 common-stock (see Common- stock dividends) distortion by pyramiding, 648–649 fictitious value placed on, 442–443 paid by subsidiaries, 447 Dodge Brothers, Inc., 315n, 512n Dollar, value of, 28 Dome Mines, Ltd., 465 Dominican Republic, 175 The Dominion Companies Act (Lighthall), 233n Double Click, 267 “Double-counting,” 59 Douglas Aircraft Company, 593–594 Dow, Jones and Company, 95 “The Dow Theory” (Rhea), 699n Drexel Burnham Lambert, 84, 138 Drug, Inc., 227 Du Pont, 15, 147n, 423, 445–446 Dun & Bradstreet (D&B), 9, 92n Dunlap, Al, 56 E E. I. du Pont de Nemours and Company, 15, 147n, 423, 445–446 Earning power: amortization of capital assets and, 464–471 concept of, 472–473 depreciation and, 453–463 disadvantages of sole emphasis on, 409–410 intrinsic value and, 65–66 long-range study of, 607–613 Earnings: arbitrary determination of, 411 distortion through parent- subsidiary relationships, 447–449 future trend in, 84–86 manufactured, in income account, 424–426 Earnings forecasting, 53–58 Earnings per share, checking via balance sheet, 598–600 Earnings power, asset valuation related to, 543–544 Earnings power evaluation, 395–423 Chieftain’s method for, 397–400 disciplined investing and, 404–408 income account an
emphasis on, 409–410 intrinsic value and, 65–66 long-range study of, 607–613 Earnings: arbitrary determination of, 411 distortion through parent- subsidiary relationships, 447–449 future trend in, 84–86 manufactured, in income account, 424–426 Earnings forecasting, 53–58 Earnings per share, checking via balance sheet, 598–600 Earnings power, asset valuation related to, 543–544 Earnings power evaluation, 395–423 Chieftain’s method for, 397–400 disciplined investing and, 404–408 income account and (see Income account) modern accounting challenges and, 400–401 undervaluation by management and, 401–404 Earnings record, 472–486 anomalous prices and price relationships in, 492–493 average vs. trend of earnings and, 477–480 caution against intuition and, 481–484 deficits and, 480–481 earnings power concept and, 472–473 fluctuations in stock prices and, 476–477 future price of product and, 491–492 qualitative considerations in, 474–476 rate of output and operating costs and, 487–491 transitory nature of large profits and, 484–486 Earnings statements, balance-sheet and income taxes as checks on, 437–438 Earnings-per-share (EPS), calculation of, 400 Eastman Kodak, 197 easyJet, 399 The Ebb and Flow of Investment Value (Mead and Grodinski), 326n, 371n EchoStar Corp., 344 Edison companies, 155 “The Effect of Direct Charges to Surplus on the Measurement of Income” (Hosmer), 600n Efficient Market Hypothesis (EMH), 281 El Paso and Southwestern Railroad Company, 320n Electric Bond and Share Company, 579, 596, 649–651 Electric Power and Light, 364n Electric Refrigeration Building Cor- poration (Kelvinator), 328, 683, 684 Electric Storage Battery Company, 456–457 Elmira and Williamsport Railroad, 203n Ely & Walker Dry Goods Co., 570, 675 Emotion, pitfalls for investing, 404–405 Engineers Public Service Company, 317n Enron, 51, 56, 717 Enterprises: continuation/noncontinuation of, 580–582 data on, 89–98 location of, 173–176 nature of, 171–173 requests for direct information from,
e Company, 579, 596, 649–651 Electric Power and Light, 364n Electric Refrigeration Building Cor- poration (Kelvinator), 328, 683, 684 Electric Storage Battery Company, 456–457 Elmira and Williamsport Railroad, 203n Ely & Walker Dry Goods Co., 570, 675 Emotion, pitfalls for investing, 404–405 Engineers Public Service Company, 317n Enron, 51, 56, 717 Enterprises: continuation/noncontinuation of, 580–582 data on, 89–98 location of, 173–176 nature of, 171–173 requests for direct information from, 97–98 size of, 176–179 subsidiary (see Consolidated reports; Subsidiaries) type of, value of data and, 82 valuation of, free cash flow and, 340–342 Equal-and-ratable security clauses, 242–243 Equipment obligations, 180–182 Erie Railroad Company, 199n, 447, 461, 646 Esthonia, 175 Eureka Pipe Line, 399 Exchange magazine, 3, 5 Executive Life, 628 Extent of analysis, limitation by character and purposes of commitment, 81–82 F F. G. Shattuck Company, 432n F. W. Lafrentz and Company, 438 F. W. Woolworth Company, 383–384, 417, 470 Fabricant, Solomon, 454n “Fair Reorganization Plans under Chapter X of the Chandler Act” (Graham), 233n Fairbanks, Morse and Company, 245 Fairholme Capital Management, 341 Falconbridge Nickel, 693n Fallen angels, 284–285 Faultless Rubber Company, 585n Federal Housing Administration (F.H.A.), 188n Federal Knitting Mills, 585 Federal Land Bank bonds, 213–214 Federal Mining and Smelting Company, 250 Federal Trade Commission, 96 Federated Department Stores, 43–44 Fifth Avenue Bus Securities Company, 94 Figaro, 716 Financial Accounting Standards Board (FASB), 400 Financial careers, embarking on, 631–632 Financial Investing Company, 183 Financial position, effects of profits or losses on, checking on, 600–607 Financial publications as information source, 97 Financial Study of the Joint Stock Land Banks (Schwartz), 213 Finland, 175 Firestone Tire and Rubber, 676, 679 First National City Bank, 135 First National Stores, 87, 88 “First-leasehold mortgage bonds,” 1
h Avenue Bus Securities Company, 94 Figaro, 716 Financial Accounting Standards Board (FASB), 400 Financial careers, embarking on, 631–632 Financial Investing Company, 183 Financial position, effects of profits or losses on, checking on, 600–607 Financial publications as information source, 97 Financial Study of the Joint Stock Land Banks (Schwartz), 213 Finland, 175 Firestone Tire and Rubber, 676, 679 First National City Bank, 135 First National Stores, 87, 88 “First-leasehold mortgage bonds,” 188 Fisher, Kenneth L., 283n Fisk Rubber Company, 149, 236, 237n, 596, 597, 685, 686 Fitch Services, 62, 97 Fixed assets, profits or losses from sale of, in income account, 414–416 Fixed-value investments: selection of, 141–144 (See also Bond(s); Common stock(s); High-grade bonds; High-grade preferred stocks; Preferred stocks) Florence Stove, 676 Florida East Coast Railway, 182 Ford, Henry, 641 Forecasting earnings, 53–58 Foreign corporate bonds, 176 Foreign-government bonds, 173–175 Foulke, Roy A., 592n 419-4th Avenue Corporation, 185n Fox Film Corporation, 237 Fox New England Theaters, Inc., 147n France, 174, 175 Francis H. Leggett Company, 328 Fred F. French Investing Company, Inc., 78n Free cash flow, 339–347 dividends and, 345–347 valuing companies and, 340–342 Freeport Sulfur Company, 489–490 Freeport Texas Company, 309n The French Plan (French), 78n Fritzemeier, Louis H., 520n Fundamental elements in security analysis, 75–88 commitment on attractive terms and, 78–79 commitment on unattractive terms and, 78 personal element as, 76 price element as, 77 relative importance of terms of commitment and character of enterprise and, 79–81 security element as, 77 time element as, 76–77 Future of value investing, 618–619 Future prospects as qualitative element in analysis, 83–84 G G. R. Kinney Company, 246n, 318 Gabriel Capital Group, 265n The Gabriel Company, 485n Gartley, H. M., 699n GE Commercial Aviation Services, 279 GEICO, 342 General American Investors, 248 General Bak
on unattractive terms and, 78 personal element as, 76 price element as, 77 relative importance of terms of commitment and character of enterprise and, 79–81 security element as, 77 time element as, 76–77 Future of value investing, 618–619 Future prospects as qualitative element in analysis, 83–84 G G. R. Kinney Company, 246n, 318 Gabriel Capital Group, 265n The Gabriel Company, 485n Gartley, H. M., 699n GE Commercial Aviation Services, 279 GEICO, 342 General American Investors, 248 General Baking Company, 86, 160n General Cigar Company, 147n General Electric Company, 22, 29–30, 106, 107–108, 110–111, 111n, 160n, 192, 200, 201n, 279, 500, 555–557, 606 General Foods Corporation, 244n General Motors Acceptance Corporation, 160n General Motors (GM) Corporation, 15, 54, 90, 91, 346, 390, 417, 445–446, 496n, 652, 672 General Public Service Corporation, 248 General Securities Group, 646 General Shoe Company, 637n, 668n, 676 General Steel Castings Corporation, 455 Geneva Corp., 646 George, Richard, 721 George A. Fuller Company, 199n Georgia Midland Railroad, 219–220 Germany, 175 Getty Oil Company, 271 Gilchrist Company, 523n, 675 Gimbel Brothers, Inc., 423, 524–525 Glen Alden Coal Company, 530, 532 Glenn L. Martin Co., 678 Glenwood Range, 92n Global value investing, 713–723 in practice, 715–720 selecting securities for, 720–723 Goizueta, Roberto, 59–60 Gold Dust Corporation, 433 Goldberg, Steven, 267n Golden, Andy, 630 Goldman Sachs, 44, 626 “Good Times Are Coming” (Miller), 282n Goodman Manufacturing, 92n Goodrich Rubber, 421 Good-will, amortization of, 471 Goodyear Tire and Rubber Company, 13, 421, 426–428, 501 Google, 53, 55 Gotham Silk Hosiery Company, 244n Graham, Benjamin, 233n, 392n biographical information about, 12–19 dissent to Smith’s thesis, 17 investment career of, 14–16 writings of, 13–14 (See also Security Analysis) Granby Consolidated Mining, Co., 465 Grand Union, 674 Granite City Steel, 663–664, 666 Grant, James, 3n, 17n Great Atlantic & Pacific Tea Com
Goodman Manufacturing, 92n Goodrich Rubber, 421 Good-will, amortization of, 471 Goodyear Tire and Rubber Company, 13, 421, 426–428, 501 Google, 53, 55 Gotham Silk Hosiery Company, 244n Graham, Benjamin, 233n, 392n biographical information about, 12–19 dissent to Smith’s thesis, 17 investment career of, 14–16 writings of, 13–14 (See also Security Analysis) Granby Consolidated Mining, Co., 465 Grand Union, 674 Granite City Steel, 663–664, 666 Grant, James, 3n, 17n Great Atlantic & Pacific Tea Company (A&P), 8, 80, 673 Great Britain, 174, 175 Great Depression, ending of, 1 Great Northern Railway, 115, 445 Great Southern Lumber Company, 584n Great Western Power Company of California, 320n Great Western Railway, 212 Greece, 175 Greed, 405 Green Bay and Western Railroad Company, 203 Green River Valley Terminal Company, 113n Griess-Pfleger Tanning Company, 9, 115n Grodinski, J., 326n, 371n Growth, common stock selection based on, 368–372 Guaranteed issues, 208–228 fixed charge calculation and, 222–226 joint and several guarantees and, 212 leasehold obligations equivalent to guarantees, 218–222 real estate mortgages and mortgage bonds, 215–218 status of, 209–210 subsidiary company bonds, 226–228 terms of guaranty and, 210–211 undervaluation of, 220–222 Guardian Investors Corporation, 247n Guatamala, 175 Guggenheim Exploration Company, 12 Guinness Peat Aviation, 278–279 Gulf Oil Corporation, 423, 466n, 467 Gulf States Steel Corporation, 159, 421 Gullick, Charles A., 680n Guthmann, H. G., 193n H H. D. Lee Mercantile, 675 H. R. Mallinson and Company, 601–602 Haiti, 175 Hale Bros. Stores, 675 Hall Printing Company, 456 Hamilton Woolen Company, 565, 584–585 Handbook of Commercial and Financial Services, 99n Hansen, Alvin, 3–4 Harbison Walker Refractories Company, 93–94, 460n Harriman Building, 252n Hartman Corporation, 95 Harvard, 630–631 Hawkins, Mason, 267n Haytian Corporation, 232n Hazel-Atlas Glass Company, 94 Hecker Products, 433, 551n Heineken, 717, 718 Hercules Powde
H. G., 193n H H. D. Lee Mercantile, 675 H. R. Mallinson and Company, 601–602 Haiti, 175 Hale Bros. Stores, 675 Hall Printing Company, 456 Hamilton Woolen Company, 565, 584–585 Handbook of Commercial and Financial Services, 99n Hansen, Alvin, 3–4 Harbison Walker Refractories Company, 93–94, 460n Harriman Building, 252n Hartman Corporation, 95 Harvard, 630–631 Hawkins, Mason, 267n Haytian Corporation, 232n Hazel-Atlas Glass Company, 94 Hecker Products, 433, 551n Heineken, 717, 718 Hercules Powder, 445 High-grade bonds, 24–28 future of interest rates and bond prices and, 25–27 safety of interest and principal and, 24–25 value of dollar and, 28 High-grade preferred stocks: future of interest rates and bond prices and, 25–27 safety of interest and principal and, 24–25 value of dollar and, 28 Hillside Coal and Iron Company, 447 Hiram Walker-Goderham and Worts, 316, 317 Hocking Valley Railway Company, 461, 646 Holding companies, pyramiding and (see Corporate pyramiding) Holland, 174, 175 Homestake Mining Co., 465 Hosmer, W. A., 600n How to Evaluate Financial Statements (Wall), 592n Hudson Motor Car Company, 433, 473 Hudson Towers, 187n Humble Oil and Refining Company, 160n Hungary, 175 Hupp Motor Car Corporation, 569–570, 601 Huyler’s of Delaware, Inc., 221 Hydro-Electric Commission of Ontario, 686 I I. B. Kleinert, 674 I. Benesch and Sons, 566n, 585 Icahn, Carl, 271, 272 Idle-plant expense in income account, 430–431 Illinois Central Railroad Company, 197n, 445 Illinois Zinc Corporation, 413n Income, investing vs. speculating and, 103–104 Income account, 92–93, 409–452 allowance for nonconsolidated profits and losses in, 445–446 amortization of bond discount in, 433–434 deferred charges in, 431–433 depreciation on, 453–463 general observations in, 413–414 idle-plant expense in, 430–431 inventory accounting and, 426–430 manufactured earnings in, 424–426 misleading artifices in, 435–452 nonrecurrent items in, 414–416, 423 padded, example of, 435–437 profits from sales of
poration, 413n Income, investing vs. speculating and, 103–104 Income account, 92–93, 409–452 allowance for nonconsolidated profits and losses in, 445–446 amortization of bond discount in, 433–434 deferred charges in, 431–433 depreciation on, 453–463 general observations in, 413–414 idle-plant expense in, 430–431 inventory accounting and, 426–430 manufactured earnings in, 424–426 misleading artifices in, 435–452 nonrecurrent items in, 414–416, 423 padded, example of, 435–437 profits from sales of marketable securities and, 416–420 profits through repurchase of senior securities at discount and, 420–423 Income bonds, 202–208 increased volume of, 204–205 interest payments on, 202–203 investment rating of, 203–204 safety margin calculations for, 205–207 senior, 207–208 Income sources, 526–532 Income taxes as check on published earnings statement, 437–438 Indentures, 229 Independent Oil and Gas Company, 306, 307 Independent surety company guarantees, 217–218 Indiana Harbor Belt Railway, 226 Industrial Office Building Company, 238n Industrial Rayon, 235n Industrials: character of, 156 depression performance of, 156–157 earnings performance of bonds and, 159–161 New York statute provisions and, 178 Industries: character of, 156 depression and, 155 information sources on, 98–99 statistical comparisons of, 660–668 Information sources for analysis, 57–60, 89–99 on company, 89–98 on industry, 98–99 Information sources for global investing, 718–719 Instability of tangibles, common- stock analysis and, 350–353 Insull system, 595 Intangibles: common-stock analysis and, 350–353 valuation of, 543 Interborough Consolidated Corporation, 492, 494 Interborough Rapid Transit Company, 63–64, 67–68, 146n, 249–250, 320, 492–495, 693, 695 Interborough-Metropolitan Corporation, 492, 494n Intercontinental Rubber Products Co., 301 Interest, safety of, investment in high-grade bonds and preferred stocks and, 24–25 Interest payments on income bonds, 202–203 Interest rates: bond prices and, 2
ck analysis and, 350–353 Insull system, 595 Intangibles: common-stock analysis and, 350–353 valuation of, 543 Interborough Consolidated Corporation, 492, 494 Interborough Rapid Transit Company, 63–64, 67–68, 146n, 249–250, 320, 492–495, 693, 695 Interborough-Metropolitan Corporation, 492, 494n Intercontinental Rubber Products Co., 301 Interest, safety of, investment in high-grade bonds and preferred stocks and, 24–25 Interest payments on income bonds, 202–203 Interest rates: bond prices and, 25–27 common stock investment and, 34 International Business Machine Corporation (IBM), 160n, 623 International Hydro-Electric System, 318 International Nickel Co. of Canada, Ltd., 465 International Paper and Power Company, 317n International Securities Corporation of America, 421, 647–648 International Shoe, 676 International Silver, 674 International Telephone and Telegraph Company, 433 Internet Capital Group (ICG), 45 Interstate Commerce Commission (I.C.C.), 94, 95, 97, 233n, 239n, 249n, 646–647 Interstate Department Stores, 118n, 222, 432n Interstate Hosiery Mills, 413n Intertype Corporation, 482–483, 675 Intrinsic value, 535–536 earning power and, 65–66 price vs., 64–65 Intrinsic value role in work of analyst, 66–67 flexibility of concept, 67–68 Inventory: last-in, first-out method for, 429 Inventory (Cont.): losses from, reserves for, in income account, 426–428 Investing: declining market value during late 1930s, 7–8 effort required for, 619–620 laymen’s disinterest in, during 1930s, 2–7 modern-day, contrast with Graham’s day, 8–12 styles of, 618 Investment: connotations of term, 100–101 definition of, 265–266 future and, 109 proposed definition of, 105–108 speculative components of, 110–111 types of, 109 Investment advice, sources of, 259–261 Investment banking firms, 626–632 floating of issues by, 635–640 as investment advice source, 259–260 new role of, 637–640 swindles and, 641–642 unsound practices, repercussions of, 642–643 Investment policies: for business corpo
930s, 2–7 modern-day, contrast with Graham’s day, 8–12 styles of, 618 Investment: connotations of term, 100–101 definition of, 265–266 future and, 109 proposed definition of, 105–108 speculative components of, 110–111 types of, 109 Investment advice, sources of, 259–261 Investment banking firms, 626–632 floating of issues by, 635–640 as investment advice source, 259–260 new role of, 637–640 swindles and, 641–642 unsound practices, repercussions of, 642–643 Investment policies: for business corporations, 709–710 for institutional investment, 710 for investors individual of large means, 709 for investors individual of small means, 706, 708–709 summary of Graham and Dodd’s views on, 706, 708–710 Investment Principles and Practices (Badger and Guthmann), 193n Investment standards: for bonds, 169–179 evolution of, 125–126 Investment trusts, common stock investing by, 360–361 Investment value, intrinsic value and, 111 The Investment Value of Goodwill (Bloomberg), 558n Investment vs. speculation, 45–47, 266 bonds and, 126–128 investment and speculation distinguished and, 100–111 Investments and Investment Policy (Burtchett), 193n Ireland, 175 Iron Steamboat Company, 250 Island Creek Coal Company, 197, 200, 550 Island Oil and Transport, 682 Italy, 175 J J. C. Penney, 223 J. D. Adams Mfg., 674 J. H. Holmes and Company, 521n J. I. Case Company, 65–66, 67, 111, 473 J. J. Newberry, 502 J. R. Thompson, 95 J. W. Watson Company, 484 Jamail, Joseph, Jr., 272n James Burroughs PLC, 719 Japan, 175 mispricing in stock market of, 621–622 Jennison Associates, 123 Johns-Manville, 500 Joint Stock Land Banks, 213, 214n Jones and Laughlin Steel, 476n Jones Soda, 58 Jordon, David F., 702n Joseph Dixon Crucible, 92n Jugoslavia, 175 Julian and Kokenge Company, 585n Julius Garfinckel and Company, 637n Junk bonds in 1980s, 43–44 K Kana Communications, 267 Kanawa and Hocking Coal and Coke Company, 208 Kansas City Public Service Company, 238 Kansas City Southern Railway Company, 198n, 212, 646
, 175 mispricing in stock market of, 621–622 Jennison Associates, 123 Johns-Manville, 500 Joint Stock Land Banks, 213, 214n Jones and Laughlin Steel, 476n Jones Soda, 58 Jordon, David F., 702n Joseph Dixon Crucible, 92n Jugoslavia, 175 Julian and Kokenge Company, 585n Julius Garfinckel and Company, 637n Junk bonds in 1980s, 43–44 K Kana Communications, 267 Kanawa and Hocking Coal and Coke Company, 208 Kansas City Public Service Company, 238 Kansas City Southern Railway Company, 198n, 212, 646 Kansas City Terminal Railway Company, 212 Kaufmann Department Stores Securities Corporation, 509n Kelsey-Hayes Wheel Company, 308 Kelvinator Corporation, 328, 684 Kennecott Copper Corp., 465 Keynes, John Maynard, 127 Keystone Watch Case Corporation, 584n Kraft Cheese Company, 432–433 Kreuger, Ivar, 412 Kreuger and Toll, 118, 309 L LabCorp, 402–403 Lackawanna Securities Company, 529–530, 531, 532 Lackawanna Steel, 606 Lake Erie and Western Railroad Company, 645 Lambert, 34 Lampert, Eddie, 58 Lane, Jeffrey, 84 Last-in, first-out inventory accounting, 429 Lawrence Portland Cement Company, 328 Lawyers Mortgage Company, 187, 216 Laymen, disinterest in investing during 1930s, 2–7 Leasehold(s), amortization of, 470–471 Leasehold improvements, amortization of, 470–471 Leasehold obligations, 218–222 Lee, Kenneth, 287n Lee & Cady, 675 Lee Tire, 668n Lehigh Coal and Navigation Company, 451, 532n Lehigh Valley Railroad, 239 Leonard, Devin, 274n Leucadia National, 344–345 Levy, Leon, 282 Lien as measure of safety, 144–151 Liggett and Myers Tobacco Company, 160n, 195, 257, 305 Lighthall, W. S., 233n Lincoln Motor Company, 636n Liquidating value: buying below, 540–541 definition of, 559 stocks selling below (see Sub- liquidating value common stocks) Liquidations, 268 examples of coups in distressed investing in, 270–273 Listing applications, as information source, 95 Litigation, market exaggerations due to, 680–683 Liz Claiborne, 543 Loew’s, Inc., 203n, 224, 225 Lone Star Gas, 147n Long-T
measure of safety, 144–151 Liggett and Myers Tobacco Company, 160n, 195, 257, 305 Lighthall, W. S., 233n Lincoln Motor Company, 636n Liquidating value: buying below, 540–541 definition of, 559 stocks selling below (see Sub- liquidating value common stocks) Liquidations, 268 examples of coups in distressed investing in, 270–273 Listing applications, as information source, 95 Litigation, market exaggerations due to, 680–683 Liz Claiborne, 543 Loew’s, Inc., 203n, 224, 225 Lone Star Gas, 147n Long-Term Capital Management (LTCM), 39, 48–49 Loose-Wiles Biscuit, 94 Losses: by buyers of low-priced common stocks, 521–523 financial position and, checking on, 600–607 Losses (Cont.): from inventory, reserves for, in income account, 426–428 nonconsolidated, allowance for, in income account, 445–446 from sale of fixed assets, in income account, 414–416 of subsidiaries, significance of, 449–452 Lotte Confectionery, 718–719 Louis K. Liggett Company, 227 Louisville and Nashville, 444 Lovett, Robert A., 7 Lowenstein, Louis, 43n Lowenstein, Roger, 40n, 41n, 59n Low-priced bonds, limitation of profit on, 323–324 Low-priced common stock, 520–526 arithmetical advantage of, 520–521 investing in, losses and, 521–523 speculative capitalization coupled with, 523–525 Lucent Technologies, 44, 56, 57 Lyman Mills, 585 Lynch, Peter, 275 M Mack Trucks, Inc., 482n Mackay Companies, 94 Management: abuse of compensation by, 579–580 conservatism of, 216 cost of, 633–635 foreign, evaluating, 715 market price for shares and, 582–585 as qualitative element in analysis, 84 relationships with stockholders (see Stockholder-management relationships) undervaluation by, 401–404 Management Assistance Liquidating Trust, 628 Mandel Brothers, Inc., 524–525 Manhattan Electrical Supply Company, 415, 421 Manhattan Shirt Company, 569–570, 601, 602–604, 607, 675 Manufactured earnings in income account, 424–426 Maple Leaf Milling Company, Ltd., 235n Margin trading, price cycling and, 671–672 Marginal purchases, inve
or shares and, 582–585 as qualitative element in analysis, 84 relationships with stockholders (see Stockholder-management relationships) undervaluation by, 401–404 Management Assistance Liquidating Trust, 628 Mandel Brothers, Inc., 524–525 Manhattan Electrical Supply Company, 415, 421 Manhattan Shirt Company, 569–570, 601, 602–604, 607, 675 Manufactured earnings in income account, 424–426 Maple Leaf Milling Company, Ltd., 235n Margin trading, price cycling and, 671–672 Marginal purchases, investing vs. speculating and, 102–103 Marion Steam Shovel, 330 Mark-downs to reduce depreciation charges, 455 Market, irrational behavior of, as barrier to security analysis, 69–70 Market analysis: Ayres mechanical forecasting method and, 702–703 disadvantages as compared with security analysis, 703–704 prophesies based on near-term prospects and, 704–706, 707 as substitute or adjunct to security analysis, 697–702 Market efficiency, 624–625, 631–632 Market price, intrinsic value related to, 70–71 Market timing, 133 Marketable securities, profits from sale of, in income account, 416–420 Market-adjusted debt (MAD) ratios, 138 Markowitz, Harry, 125 Marland Oil Company, 466 Marlin Rockwell Corporation, 93n Maryland Casualty Company, 218n Mason City and Fort Dodge Railroad Company, 97 Mathieson Alkali, 93n Maytag Company, 509n, 652 McClelland Stores Co., 224, 225 McCrory Stores Corp., 224, 225 McDonald, Jack, 713 McDonald’s, 53 MCI, 545 “MCI: Is Being Good Good Enough?” (Mehta), 279n MCI WorldCom, 279–280 McKeesport Tin Plate Corporation, 460n McKesson and Robbins Company, 330, 412n–413n Mead, Edward S., 326n, 371n Means, G. C., 199n, 576, 577 Mehta, Stephanie N., 279n The Memoirs of the Dean of Wall Street (Graham), 1 Mergers: depreciation and, 461 market exaggerations due to, 680 Merrill Lynch & Company, 5, 44 Message Media, 267 Mesta Machine, 93n Metropolitan Casualty Company, 218n Mexico, 175 Meyer, Jack, 630 MFS Communications, 545 Microsoft, 54–56, 340, 342 Midland Steel Prod
ldCom, 279–280 McKeesport Tin Plate Corporation, 460n McKesson and Robbins Company, 330, 412n–413n Mead, Edward S., 326n, 371n Means, G. C., 199n, 576, 577 Mehta, Stephanie N., 279n The Memoirs of the Dean of Wall Street (Graham), 1 Mergers: depreciation and, 461 market exaggerations due to, 680 Merrill Lynch & Company, 5, 44 Message Media, 267 Mesta Machine, 93n Metropolitan Casualty Company, 218n Mexico, 175 Meyer, Jack, 630 MFS Communications, 545 Microsoft, 54–56, 340, 342 Midland Steel Products Company, 457 Milken, Michael, 138 Miller, Bill, 282n Milwaukee, Sparta and Northwestern, 153 Milwaukee Lake Shore and Western, 202n Mining companies, ore reserve amortization by, 464–469 Minneapolis, St. Paul and Sault Sainte Marie Railroad, 210–211, 212, 226 Missouri-Kansas-Texas Railroad Company, 146, 205–207, 212, 318 Missouri Pacific Railroad Company, 152–153, 199n, 212, 646 Mobile and Ohio Railroad, 222n, 693–694 The Modern Corporation and Private Property (Berle and Means), 199n, 576 Mohawk Hudson Power Corporation, 306, 307 Mohawk Industries, 342–343 Mohawk Mining Company, 567, 585 Mohawk Rubber, 517, 519 Montana Power Company, 506 Monthly statements as information source, 90 Moody’s, 97 Moody’s Manual, 78n Moody’s Manual of Industrials, 591n Moody’s Manual of Investments, 448n–449n Moran v. United States Cast Iron Pipe and Foundry Company, 198n Morgan Stanley, 5, 44, 626 Mortgage(s), purchase-money, 243 Mortgage bonds, 215–218 Mortgage companies, 187–188 Mortgage guarantees, 215–218 flame-out of, in early 1930s, 10–11 Mouquin, Inc., 638n Mullins Body Corporation, 678, 679 Mullins Manufacturing, 90, 678, 679 Munger, Charlie, 58 Murray Corporation, 328–329 Mutual savings banks, selling down of, investing and, 50 N Nairn Linoleum Company, 684 National Acme, 330 National Biscuit Company, 141–142, 251, 350, 351–352, 353, 462–463 National Bondholders Corporation, 682n National Broadcasting Company, 471 National Cloak and Suit, 383n National Department Stores, 198 N
ees, 215–218 flame-out of, in early 1930s, 10–11 Mouquin, Inc., 638n Mullins Body Corporation, 678, 679 Mullins Manufacturing, 90, 678, 679 Munger, Charlie, 58 Murray Corporation, 328–329 Mutual savings banks, selling down of, investing and, 50 N Nairn Linoleum Company, 684 National Acme, 330 National Biscuit Company, 141–142, 251, 350, 351–352, 353, 462–463 National Bondholders Corporation, 682n National Broadcasting Company, 471 National Cloak and Suit, 383n National Department Stores, 198 National Distillers Products Corporation, 308 National Electric Power, 240n National Enameling and Stamping Company, 460n National Hotel of Cuba, 235n National Investors Corporation, 368, 369 National Lead Company, 429 National Radiator Corporation, 243n National Sugar Refining Company, 160n, 460 National Surety Company, 218 National Trade Journals, Inc., 294–295, 296 National Transit Company, 416 Nature of business as qualitative element in analysis, 83–84 Neisner Brothers, Inc., 225 Neisner Realty Corporation, 225 Nelson Act, 270n Neporent, Mark, 280 Nestlé, 716, 719 Netherlands, 174, 175n New Idea Company, 637n, 674 New Jersey Zinc, 92n New York, Chicago and St. Louis Railroad Company (Nickel Plate), 417, 444, 447, 448, 597, 644, 645, 646 New York, New Haven and Hartford Railroad Company, 147n, 242–243, 315n, 322 New York and Erie Railroad, 152 New York Central Railroad Company, 226, 645, 658 New York City, 216, 249–250 New York Curb, 92n New York Edison Company, 243–244 New York Moratorium Law, 252n New York Savings-bank Law: bond investment criteria imposed by, 170–179 provisions of, 177–178 New York State, 233n New York State Railways, 235n New York Stock Exchange, 235n New York Stock Exchange firms as investment advice source, 260 New York Transit Company, 430 New York Water Service Corporation, 595 N. Y. and Harlem Railroad, 222n N. Y. Merchandise, 674 Newberger, Henderson & Loeb, 12 New-enterprise financing, public, 640–641 Newman, Jerry, 4, 15–16 Niagara Shares Cor
oratorium Law, 252n New York Savings-bank Law: bond investment criteria imposed by, 170–179 provisions of, 177–178 New York State, 233n New York State Railways, 235n New York Stock Exchange, 235n New York Stock Exchange firms as investment advice source, 260 New York Transit Company, 430 New York Water Service Corporation, 595 N. Y. and Harlem Railroad, 222n N. Y. Merchandise, 674 Newberger, Henderson & Loeb, 12 New-enterprise financing, public, 640–641 Newman, Jerry, 4, 15–16 Niagara Shares Corporation, 248 Nicaragua, 175 Nickel Plate (New York, Chicago and St. Louis Railroad Company), 444, 447, 448, 461, 597, 644, 645, 646 Niles-Bement-Pond, 211 NLRB v. Bildisco & Bildisco, 272n “Noncash Dividends and Stock Rights as Methods for Avoidance of the Undistributed Profits Tax” (Rolbein), 391n Noranda Mines, Ltd., 465 Norfolk and Western Railway Company, 158n, 197, 201n Normal-stock inventory accounting, 429–430 North American Company, 90, 444n, 647, 693n Northern Express Company, 447 Northern Pacific Railway Company, 117, 244, 445, 447 Northern Pipeline Company, 527–529, 531–532, 562, 567–568 Northern States Power Company, 434n Northwestern Improvement Company, 447 Norway, 175 O O. J. Curry, 387n Oaktree Capital Management, L.P., 130 Ohio Copper Company, 302–303 Ohio Oil Company, 468 Oil and Gas Journal, 95 Oil reserves: amortization of, 464–469 depletion of, 465–467 100 Minds That Made the Market (Fisher), 283n Ontario Power Service Corporation, 686 Open-market purchases, shareholder abuse through, 586–589 Operating costs in earnings record, 487–491 Oppenheim Collins and Company, 94 Oracle, 340 Ore reserves, amortization of, 464–469 Otis Company, 553–554, 562, 567–568, 583–584 Otis Steel, 90 The Outlet Company, 222 Output, rate of, in earnings record, 487–491 Outright purchases, investing vs. speculating and, 102–103 Overvaluation, 10 Owens-Illinois Glass Company, 63, 66 P P. Lorillard Company, 160n Pacific Commercial, 674 Pacific Mills, 570 Pacific Power and Ligh
reholder abuse through, 586–589 Operating costs in earnings record, 487–491 Oppenheim Collins and Company, 94 Oracle, 340 Ore reserves, amortization of, 464–469 Otis Company, 553–554, 562, 567–568, 583–584 Otis Steel, 90 The Outlet Company, 222 Output, rate of, in earnings record, 487–491 Outright purchases, investing vs. speculating and, 102–103 Overvaluation, 10 Owens-Illinois Glass Company, 63, 66 P P. Lorillard Company, 160n Pacific Commercial, 674 Pacific Mills, 570 Pacific Power and Light, 151 Pacific Railway of Missouri, 152–153 Pan American Petroleum, 306 Panama, 175 Paramount Pictures, 64 Park and Tilford, Inc., 435–437 Participating interests, allowance for, 505–506 Participation privilege: disadvantage of, 305–306 unlimited, 304–305 Patents, amortization of, 471 Patino Mines, 465 Patterson-UTI Energy, 51 “Pay-in-kind” (PIK) preferreds, 284 Pennsylvania Coal Company, 447, 556, 557 Pennsylvania Railroad Company, 23, 218n, 350, 353, 355 Pennzoil, 271–272 Pennzoil v. Texaco, 272n Pepperell Manufacturing, 556, 557, 562, 564, 672 Pepsi-Cola, 676 Pequot Capital Management, 267 Pere Marquette Railway Company, 158n, 244, 417, 448, 461, 645, 646 Perfection Stove, 92n Permanent holdings, investing vs. speculating and, 102–103 “Permanent investment,” 253 Pernod Ricard, 719 Peru, 175 Petroleum Corporation of America, 633–635 Phelps Dodge Corp., 465 Philip Morris, Inc., 667n, 676, 716 Philippine Railway Company, 210 Philippines (government), 210 Pierce Oil, 693n Pierce Petroleum, 693n Pillsbury Flour Mills Company, 160n Pittsburgh, Fort Wayne and Chicago Railway Company, 218n Pittsburgh, Youngstown and Ashtabula Railway, 199n Pittsburgh Plate Glass, 94 The Pittston Company, 646 Plowing back dividends, 381, 383–384 Plymouth Cordage Company, 429–430, 601–602, 604–605, 672 Pocohantas Fuel Company, 92n Poland, 175 Poor’s Publishing Company, 97 Porto Rican-American Tobacco Company, 316, 317n Postal Telegraph and Cable Corporation, 94 Potts, Mark, 272n Prairie Oil and Ga
leum, 693n Pillsbury Flour Mills Company, 160n Pittsburgh, Fort Wayne and Chicago Railway Company, 218n Pittsburgh, Youngstown and Ashtabula Railway, 199n Pittsburgh Plate Glass, 94 The Pittston Company, 646 Plowing back dividends, 381, 383–384 Plymouth Cordage Company, 429–430, 601–602, 604–605, 672 Pocohantas Fuel Company, 92n Poland, 175 Poor’s Publishing Company, 97 Porto Rican-American Tobacco Company, 316, 317n Postal Telegraph and Cable Corporation, 94 Potts, Mark, 272n Prairie Oil and Gas Company, 635 Prairie Pipe Line Company, 635 Pratt and Whitney, 211 Preferred stocks, 190–201 bond issues convertible into, 318–319 book value of, calculation of, 551–553 common stock valuation and, 550–551 criteria for, 190–191 earnings coverage calculation for, 192–196 features of, 199–201 as fixed-value investment, 141–142 funded debt and, 191–192 high-grade (see High-grade preferred stocks) noncumulative issues and, 197–199 speculative (see Speculative preferred stocks) stock-value ratio calculation for, 196–197 undervalued, market exaggerations due to, 683–685 Preinreich, Gabriel, 364n “Present Day Investment Problems of Endowed Institutions” (Tighe), 710n Price(s) (see Bond prices; Product price; Securities prices; Stock prices) Price-earnings ratios, 496–503, 537 basis of maximum appraisal for investment and, 497–499 impossibility of exact appraisal of, 497 speculative vs. investment common stocks and, 499–503 Price-value discrepancies, 669–696 bankruptcy and, 685–687 in comparative prices, 691–692 cyclical swings of prices and, exploiting, 670–672 definitely related issues and, 693–695 market behavior of standard and nonstandard issues and, 677–679 market exaggerations and, 679–683 opportunities in “secondary” or little-known issues, 672–677 price inertia of seasoned issues and, 688–689 price vulnerability of unseasoned issues and, 689–691 supply and demand factors and, 695–696 undervaluation and, 683–685 Princeton, 630–631 Principal, safety of, investment in hig
arative prices, 691–692 cyclical swings of prices and, exploiting, 670–672 definitely related issues and, 693–695 market behavior of standard and nonstandard issues and, 677–679 market exaggerations and, 679–683 opportunities in “secondary” or little-known issues, 672–677 price inertia of seasoned issues and, 688–689 price vulnerability of unseasoned issues and, 689–691 supply and demand factors and, 695–696 undervaluation and, 683–685 Princeton, 630–631 Principal, safety of, investment in high-grade bonds and preferred stocks and, 24–25 Privileged issues, 289–312 comparative merits of types of, 304–312 considerations generally applicable to, 299–304 at disadvantage, marketwise, 305–306 senior issues with speculative privileges, 289–298 unlimited participation privilege and, 304–305 Procter and Gamble Company, 196, 200, 551n Product price, future, earnings and, 491–492 Profits: financial position and, checking on, 600–607 future of, common-stock investment and, 31 investing vs. speculating and, 103–104 large, transitoriness of, 484–486 on low-priced bonds, limitation on, 323–324 nonconsolidated, allowance for, in income account, 445–446 through repurchase of senior securities at discount, 420–423 from sale of fixed assets, in income account, 414–416 from sale of marketable securi- ties, in income account, 416–420 undistributed, tax on, 390–392 Property value: appraisals and, 185–187 earning power related to, 184–185 Prospectuses as information source, 95–96 Protective covenants, 228–252 bankruptcy and reorganization and, 231–236 bondholders’ legal rights and, 230–231 equal-and-ratable security clauses, 242–243 for investment-trust issues, 247–252 prior lien prohibition and, 242–243 protective committee and, 240–241 safeguards against creation of additional amounts of bond issue, 244 subordination of bond issues to bank debt in reorganization, 243 tendency to sell below fair value and, 236–237 voluntary readjustment plans and, 237–239 voting control, 246 working-
enants, 228–252 bankruptcy and reorganization and, 231–236 bondholders’ legal rights and, 230–231 equal-and-ratable security clauses, 242–243 for investment-trust issues, 247–252 prior lien prohibition and, 242–243 protective committee and, 240–241 safeguards against creation of additional amounts of bond issue, 244 subordination of bond issues to bank debt in reorganization, 243 tendency to sell below fair value and, 236–237 voluntary readjustment plans and, 237–239 voting control, 246 working-capital requirements, 245–246 Public agencies, reports to, as information source, 94–95 Public Service Corporation of New Jersey, 227 Public Service of New Hampshire, 628 Public utilities: character of, 156 depression performance of, 156–157 New York statute provisions and, 177, 178 statistical comparisons of, 660 Public Utility Act of 1935, 96 Public Utility Holding Company Act of 1935, 641–642, 652 Publix Super Markets, 275 Purchase-money mortgages, 243 Purchase(s) of companies, using stock, 401–402 Pure Oil Company, 467 Purity Bakeries Corporation, 450–451 Pyramiding (see Corporate pyramiding) Q Qualitative elements in analysis: appraisal of, 86 quantitative elements vs., 82–83 Quantitative elements in analysis: for industry comparison, 665 qualitative elements vs., 82–83 Quarterly statements as information source, 91 R R. Hoe and Company, 329 R. J. Reynolds Tobacco Company, 306n Radio Corporation of America, 101, 471 Radio-Keith-Orpheum Corporation, 237 Railroad(s): character of, 156 corporate pyramiding by, 644–647 depression performance of, 156–157 earnings performance of bonds and, 158–159 equipment obligations of, 181, 182 New York statute provisions and, 177–178 safeguards against creation of additional amounts of bond issue and, 244 statistical comparisons of, 654–659 undervaluation and, 684–685 Railroad trusteeships, opportunities in, 687 Railway Age, 95 Rand Kardex Bureau, Inc., 293–294, 301 Raskob, J. J., 496n Reading Company, 158n, 444n, 681 Real estate appr
156 corporate pyramiding by, 644–647 depression performance of, 156–157 earnings performance of bonds and, 158–159 equipment obligations of, 181, 182 New York statute provisions and, 177–178 safeguards against creation of additional amounts of bond issue and, 244 statistical comparisons of, 654–659 undervaluation and, 684–685 Railroad trusteeships, opportunities in, 687 Railway Age, 95 Rand Kardex Bureau, Inc., 293–294, 301 Raskob, J. J., 496n Reading Company, 158n, 444n, 681 Real estate appraisals, 185 Real estate bonds, 183–189 Real estate mortgage guarantees, 215–218 Realizable value of assets, 560–562 Receivership, bondholders’ legal rights and, 230–231 Regal Shoe, 92n Registration statements, as information source, 95–96 “Relative Price Fluctuations of Industrial Stocks in Different Price Groups” (Fritzemeier), 520n Reliable Stores Corporation, 301 Reliance Management Corporation, 183 Reliance Mfg., 675 Remington Rand, Inc., 197 Remington Typewriter, 294 Reorganizations, 268–269 bondholders and, 231–236 examples of coups in distressed investing in, 278–280 subordination of bond issues to bank debt in, 243 Report of the Industrial Securities Committee of the Investment Bankers Association of America for 1927, 290n Report on the Study and Investigation of the Work, Activities, Personnel and Functions of Protective and Reorganization Committees (S.E.C.), 235n Reports to commissions as information source, 94–95 Reports to stockholders as information source, 89–94 Republic Iron and Steel Company, 606, 692 Republic Steel Corporation, 245 Repurchase of senior securities at discount, profits through, 420–423 Reserves for inventory losses in income account, 426–428 “Revaluations of Fixed Assets, 1925- 1926” (Fabricant), 454n Revenue Act of 1936, 579n Revenue Act of 1938, 429n, 579n Revenue Act of 1939, 429n Reynolds Investing Company, 247n, 248n Rhea, Robert, 699n Rich, Louis, 2 Richfield Oil Corporation, 235n Rigas, John, 274 Risk, 283–287 cyclical, 165–166 invest
ic Iron and Steel Company, 606, 692 Republic Steel Corporation, 245 Repurchase of senior securities at discount, profits through, 420–423 Reserves for inventory losses in income account, 426–428 “Revaluations of Fixed Assets, 1925- 1926” (Fabricant), 454n Revenue Act of 1936, 579n Revenue Act of 1938, 429n, 579n Revenue Act of 1939, 429n Reynolds Investing Company, 247n, 248n Rhea, Robert, 699n Rich, Louis, 2 Richfield Oil Corporation, 235n Rigas, John, 274 Risk, 283–287 cyclical, 165–166 investing vs. speculating and, 103–104 relationship with yield, 164–168 Roberts, Brian, 401, 402 Rock Island Company, 212, 645–647, 658, 659 Rodkey, Robert G., 201n Rolbein, David L., 391n Rosenman, Judge, 240n Ruane Cunniff & Goldfarb, 50 Rumania, 175 Russia, 175 Ryanair, 398–399 S S. H. Kress and Company, 196, 223, 473 Safety: of bonds, 142–143 income bonds and, 205–207 investing vs. speculating and, 103–104 measurement of, 144–153 sacrificing for yield, 164–168 of speculative senior issues, 327–330 Safety margin: common-stock selection based on, 372–375 distressed investing and, 268 exceptional, 257–258 Safety standards, 105 for bond investment, 169–170 St. Joseph Lead Co., 465 St. Louis Southwestern Railway Company, 198n, 207–208 St. Louis-San Francisco Railway Company, 63, 66, 197n, 198, 199n, 202n, 212, 646 Saltex Looms, Inc., 227 Salvador, 175 Samberg, Arthur, 267 San Antonio and Aransas Pass Railway Company, 220, 221 San Francisco Toll-Bridge Company, 309 San Joaquin Light and Power Corporation, 320n Sao Paulo, 173n Savings Bank Trust Company of New York, 172 Savold Tire, 15 Savoy Plaza Corporation, 208n Schackno Act, 233n Schletter and Zander, Inc., 365 Schloss, Edwin, 57–58 Schloss, Walter, 57–58 Schulte Retail Stores Corporation, 221 Schumpeter, Joseph, 3 Schwartz, Carl H., 213n Schwed, Fred, Jr., 6 Seaboard Air Line, 182 Seaboard-All Florida Railway, 145 Seager, Henry R., 680n Sears Roebuck, 53, 383n Seasoned issues, price inertia of, 688–689 Secular stagnation, 3–4
r Corporation, 320n Sao Paulo, 173n Savings Bank Trust Company of New York, 172 Savold Tire, 15 Savoy Plaza Corporation, 208n Schackno Act, 233n Schletter and Zander, Inc., 365 Schloss, Edwin, 57–58 Schloss, Walter, 57–58 Schulte Retail Stores Corporation, 221 Schumpeter, Joseph, 3 Schwartz, Carl H., 213n Schwed, Fred, Jr., 6 Seaboard Air Line, 182 Seaboard-All Florida Railway, 145 Seager, Henry R., 680n Sears Roebuck, 53, 383n Seasoned issues, price inertia of, 688–689 Secular stagnation, 3–4 Securities Act of 1933, 414n Securities analysis, general procedure for, 669–670 Securities and Exchange Commission, 115n, 223, 232 Securities as element in security analysis, 7 Securities Exchange Act of 1934, 255n, 414n, 582 Securities prices: comparative, discrepancies in, 691–692 of convertible and warrant- bearing issues, 306–307 of definitely related issues, comparison of, 693–695 as element in security analysis, 77 intrinsic value vs., 64–65 of seasoned issues, inertia of, 688–689 sensitivity of, 256–257 of speculative preferred stocks, 330–334 supply and demand factors and, 695–696 (See also Bond prices; Stock prices) Security analysis: Ayres mechanical forecasting method and, 702–703 at Chieftain Capital Management, 397–400 critical function of, 73–74 cyclical nature of, 11–12 descriptive function of, 62 disadvantages of market analysis as compared with, 703–704 market analysis as substitute or adjunct to, 697–702 prestige of, 61 prophesies based on near-term prospects and, 704–706, 707 selective function of, 62–71 speculation and, 71–73 usefulness of, 62 Security Analysis, shortcomings of, 620–622 Security Analysis, first edition: acceptance of, 16–19, 39–40 analytical approach of, 41–44 endurance of, 40–41, 42–43, 137–140 focus on bonds, 44 historical background, 1–19 Rich’s review of, 2 Security Analysis, second edition: on corporate finance, 8–12 historical background, 1, 6 Segregations, market exaggerations due to, 680 Selective function of security analysis,
704–706, 707 selective function of, 62–71 speculation and, 71–73 usefulness of, 62 Security Analysis, shortcomings of, 620–622 Security Analysis, first edition: acceptance of, 16–19, 39–40 analytical approach of, 41–44 endurance of, 40–41, 42–43, 137–140 focus on bonds, 44 historical background, 1–19 Rich’s review of, 2 Security Analysis, second edition: on corporate finance, 8–12 historical background, 1, 6 Segregations, market exaggerations due to, 680 Selective function of security analysis, 62–71 examples of analytical judgments and, 63–64 intrinsic value and, 64–68, 70–71 obstacles to, 68–70 tardy adjustment of price value and, 70 Semiannual reports as information source, 91 Senior securities, 229–241 indenture or charter provisions designed to protect holders of, 229–230 Seton Leather, 674 Shabacker, R. W., 699n Shaffner, Felix I., 104n Shamus, Sanford L., 635n Share repurchases, 402 Shawinigan Water and Power Company, 320n Shawmut Association, 571–573 Shawmut Bank Investment Trust, 571–573 Sheaffer Pen, 93n Shearson Lehman Hutton, 84 Shinyoung Securities, 50–51 Sidney Blumenthal & Co., Inc., 227, 329 Siemens and Halski, 309 Signature Hosiery Company, 365, 585 Signs of the Times (Foulke), 592n Simmons, 501 Simms Petroleum Company, 585n Sinking funds: for investment-trust issues, 247–252 safety of speculative senior issues and, 327–330 Skelly Oil, 245 Sliding scales to accelerate conversion, 315–318 Sloan, Lawrence H., 103n Smith, Edgar Lawrence, 17, 361, 362 Smith (A.O.) Corporation, 160n Socony Vacuum Corporation, 160n, 467 Sources of income, 526–532 Southern Pacific Company, 220, 221, 320n Southern Railway, 219–220, 693–694 Spear and Company, 692 Speculation: analysis and, 71–73 emphasis on future prospects and, 354–355 future and, 109 investment vs. (see Investment vs. speculation) senior issues with speculative privileges and, 289–298 temptation for, 266 types of, 110 Speculative capital structure: attractiveness of investment and, 518–519 creating wi
.O.) Corporation, 160n Socony Vacuum Corporation, 160n, 467 Sources of income, 526–532 Southern Pacific Company, 220, 221, 320n Southern Railway, 219–220, 693–694 Spear and Company, 692 Speculation: analysis and, 71–73 emphasis on future prospects and, 354–355 future and, 109 investment vs. (see Investment vs. speculation) senior issues with speculative privileges and, 289–298 temptation for, 266 types of, 110 Speculative capital structure: attractiveness of investment and, 518–519 creating without using holding companies, 652 high production cost equivalence to, 525–526 leverage in, 512–516 low price coupled with, 523–525 undervaluation and, 516–518 Speculative common stocks: attractiveness of investment and, 518–519 investment common stocks vs., 499–503 Speculative preferred stocks, 28 prices of, 330–334 Speculative senior securities, 323–335 capital structure and, 334–335 common stocks distinguished from, 325–327 limitation of profit on low-prices bonds and, 323–324 preferred stock prices and, 330–334 sinking funds and, 327–330 viewpoints on bonds and, 324–325 working-capital and, 327–330 Speculative value, intrinsic value and, 111 Stability as qualitative element in analysis, 86–88 Standard & Poor’s Corp., 97 Standard Corporation Records, 97 Standard Oil Company of Indiana, 160n, 466n, 566 Standard Oil Company of Nebraska, 565–566, 585 Standard Oil Company of New Jersey, 148, 160n, 466n Standard Oil Group, 90, 95, 568, 584n Standard Statistics Bond Guide, 226 Standard Statistics Company, Inc., 62, 93n, 427, 428n, 447n, 551n, 696n Starbucks, 58 Statistical publications, as information source, 97 “A Statistical Test of the Success of Consolidations” (Dewing), 680n Stavrou, Chris, 628 Steel and Tube Company of America, 683 “Steel Sinkers,” 249 Stewart Warner Corporation, 430, 600n Stock(s): investing vs. speculating and, 102 as unsafe investment, rejection of rule by Graham and Dodd, 43 (See also Common stock(s); Preferred stocks) Stock market, collapse of publ
Statistics Company, Inc., 62, 93n, 427, 428n, 447n, 551n, 696n Starbucks, 58 Statistical publications, as information source, 97 “A Statistical Test of the Success of Consolidations” (Dewing), 680n Stavrou, Chris, 628 Steel and Tube Company of America, 683 “Steel Sinkers,” 249 Stewart Warner Corporation, 430, 600n Stock(s): investing vs. speculating and, 102 as unsafe investment, rejection of rule by Graham and Dodd, 43 (See also Common stock(s); Preferred stocks) Stock market, collapse of public participation in, following Great Depression, 5–6 Stock Market Profits (Shabacker), 699n Stock options, 623–626 Stock prices: correcting, 583–585 cyclical swings of, exploiting, 670–672 insolvency and, 686–687 management’s interest in, 583–584 price-value discrepancies in receiverships and, 685–686 Stock swindles, 641–642 Stock watering, plowing back due to, 383–384 Stockholder(s), reports to, 89–94 Stockholder-management relationships, 575–590 abuse of shareholders through open-market purchase of shares and, 586–589 conflict of interest and, 577–578 continuation/noncontinuation of business and, 580–582 directors’ self-interest and, 578–580 false stockholder assumptions and, 577 market price for shares and, 582–585 stockholder apathy and docility and, 575–576 stockholder assumptions about management and, 577 Stokely Brothers and Company, 593–594, 598 Stone, Sheldon, 131, 132 Studebaker Corporation, 87–88, 236, 237, 474–475, 565, 588n, 606 A Study of Corporation Securities (Dewing), 220n, 308n Sub-liquidating value common stocks, 562–574 favorable developments on, 564–568 prevalence of, 562–564 selection of, 568–570 Subsidiaries, 51–53 consolidated reports and (see Consolidated reports) intercorporate debt and, 596 losses of, significance of, 449–452 Subsidiary company bonds, 226–227 Sunbeam, 56 Supervision of investment holdings, 253–261 in depression, 258 exceptional margins of safety and, 257–258 investment advice sources and, 259–261 periodic inspection for, 253–254
, 220n, 308n Sub-liquidating value common stocks, 562–574 favorable developments on, 564–568 prevalence of, 562–564 selection of, 568–570 Subsidiaries, 51–53 consolidated reports and (see Consolidated reports) intercorporate debt and, 596 losses of, significance of, 449–452 Subsidiary company bonds, 226–227 Sunbeam, 56 Supervision of investment holdings, 253–261 in depression, 258 exceptional margins of safety and, 257–258 investment advice sources and, 259–261 periodic inspection for, 253–254 switching and, 256–257 Survey of Current Business, 95, 98 Sweden, 175 Swensen, David, 620, 630 Swift and Company, 224, 374n, 428 Switching, 256–257 Switzerland, 174, 175 Syracuse System, 235n T Taxes: as check on published earnings statement, 437–438 on undistributed profits, 390–392 Templeton, John, 282 Temporary holdings, investing vs. speculating and, 102–103 Terms of issue, data on, 89 Texaco, 270–273 “Texaco, Icahn Make a Deal” (Arndt), 272n Texas Company, 489 Texas Fuel Company, 271 Texas Gulf Producing Company, 469 Texas Gulf Sulphur Co., 465, 489n, 490 The Theory of Dividends (Preinreich), 364n The Theory of Investment Value (Williams), 18, 364n, 476n Third Avenue Railway, 235n Tidewater Associated, 466n Tighe, Laurence G., 710n Time as element in security analysis, 76–77 Time Warner, 274, 275 Timing of investment in common stock, 34–35 Tintex Company, Inc., 435 Title Guarantee and Trust Company, 187 Tobacco Products Corporation of New Jersey, 218, 250, 442–443 Tobacco Products Corporation of Virginia, 530–531, 532, 649 Toledo, St. Louis and Western Railroad Company, 645 Tonopah Mining, 14 Trico Products Corporation, 93n, 505–506 Trinity Buildings Corporation of New York, 189n, 208n, 232n Trouncing the Dow: A Value-Based Method for Making Huge Profits (Lee), 287n Trust and Corporation Problems (Seager and Gullick), 680n Trust Indenture Act of 1939, 232, 239–240 Tubize Chatillon Corporation, 551–553 Tung Sol Lamp Company, 685n U Undervaluation, 10 of guaranteed issu
cts Corporation of Virginia, 530–531, 532, 649 Toledo, St. Louis and Western Railroad Company, 645 Tonopah Mining, 14 Trico Products Corporation, 93n, 505–506 Trinity Buildings Corporation of New York, 189n, 208n, 232n Trouncing the Dow: A Value-Based Method for Making Huge Profits (Lee), 287n Trust and Corporation Problems (Seager and Gullick), 680n Trust Indenture Act of 1939, 232, 239–240 Tubize Chatillon Corporation, 551–553 Tung Sol Lamp Company, 685n U Undervaluation, 10 of guaranteed issues, 220–222 by management, earnings power evaluation and, 401–404 market exaggerations due to, 683–685 speculative capital structure and, 516–518 Undistributed profits, tax on, 390–392 The Undistributed Profits Tax (Buehler), 392n “The Undistributed Profits Tax and the Investor” (Graham), 392n Union Carbide and Carbon Corporation, 218 Union Pacific, 10, 153, 158n, 212, 388, 445, 658, 659, 695 Union Pacific Railroad–Oregon Short Line, 308n United Aircraft and Transport Corporation, 310 United Biscuit, 309n United Cigar Stores, 95, 223, 227, 438–442, 530–531, 649 United Cigar–Whelan Stores, 421 United Drug Company, 226–227, 228, 421 United Engineering and Foundry, 93n United Fruit, 92n United Gas Corporation, 596 United Light and Power Company, 514n United Light and Railways Company of Delaware, 652 United Merchants and Manufacturers, 423 United Railway Company, 683 United Savings Bank of Tacoma, 50 United Shipyards, 566n, 585, 682–683 United States and Foreign Securities Corporation, 644n United States and International Securities Corporation, 644n United States Cast Iron Pipe, 198 United States Coal Commission, 57, 96 United States Express Company, 113n United States Fidelity and Guaranty Corporation, 218n United States government bonds, 254 United States Industrial Alcohol Company, 209, 425n, 599–600 United States Leather Company, 92 United States Liberty Bonds, 103, 695–696 United States Lines Company, 199n United States Radiator Corporation, 245, 246, 246n United State
644n United States and International Securities Corporation, 644n United States Cast Iron Pipe, 198 United States Coal Commission, 57, 96 United States Express Company, 113n United States Fidelity and Guaranty Corporation, 218n United States government bonds, 254 United States Industrial Alcohol Company, 209, 425n, 599–600 United States Leather Company, 92 United States Liberty Bonds, 103, 695–696 United States Lines Company, 199n United States Radiator Corporation, 245, 246, 246n United States Realty and Improvement Company, 189n, 208n, 232n United States Rubber Company, 426–428, 606–607, 688–689 United States Savings Bonds, 25, 696 advantages of, 696 superiority of, 254–256 United States Steel Corporation, 22, 90, 93, 94, 95, 155n, 160n, 249, 308n, 380, 384, 415–416, 421, 423, 474–475, 476n, 481, 549, 607–611, 612–613, 652, 705, 707 United States Tobacco Company, 200 United States Treasury Bonds, 10, 76 United States Victory Bonds, 695–696 United Steel Works Corporation, 309 Universal Pictures Company, 327 University of Michigan, 201n Unseasoned issues, price vulnerability of, 689–691 Uruguay, 175 Utah Power and Light Company, 420 Utah Securities Corporation, 420 Utica, Clinton and Binghamton Railroad, 208n Utility holding companies, shunning of, 52 Utilization of Corporate Profits in Prosperity and Depression (Curry), 387n V Valuation, 48–49 Van Sweringen, M. J., 644–647 Van Sweringen, O. P., 644–647 The Vaness Co., 646 Ventures, Ltd., 693n Verizon, 280 Vermont, 174 Virginia Transportation Company, 646 Voting control, 246 W W. T. Grant, 225 Wabash Railroad, 182, 207n–208n, 212, 448n–449n Wabash Railway et al. v. Barclay et al., 199 Waldorf System, 95 Wall, Alexander, 592n Wal-Mart Stores, 53, 275, 277, 401 Walt Disney, 40, 401–402 “Want to Win at Fund Investing? Learn from Longleaf ” (Goldberg), 267n Ward Baking, 691–692 Warner Bros. Pictures, Inc., 194, 290n Warrant-bearing issues, 306–312, 620–621 callable provision and, 308–310 disposal of, 311 price behav
rginia Transportation Company, 646 Voting control, 246 W W. T. Grant, 225 Wabash Railroad, 182, 207n–208n, 212, 448n–449n Wabash Railway et al. v. Barclay et al., 199 Waldorf System, 95 Wall, Alexander, 592n Wal-Mart Stores, 53, 275, 277, 401 Walt Disney, 40, 401–402 “Want to Win at Fund Investing? Learn from Longleaf ” (Goldberg), 267n Ward Baking, 691–692 Warner Bros. Pictures, Inc., 194, 290n Warrant-bearing issues, 306–312, 620–621 callable provision and, 308–310 disposal of, 311 price behavior of, 306–307 pyramiding and, 650–651 separability of speculative components of, 307–308 Warren Brothers Company, 444n Washington Mutual (WaMu), 45–47, 57 Waste Management, 56 Weetabix, 718, 720–723 West Penn Electric Company, 193, 194 West Virginia Pulp and Paper, 245 Western Auto Supply Company, 598 Western Pacific Railroad Corporation, 448 Western Union Telegraph Company, 211 Westinghouse Electric and Manufacturing Company, 80, 304–305, 306 Westmoreland Coal Company, 532n, 588–589 Westvaco Chlorine Products Corporation, 218 Wheeling and Lake Erie Railway Company, 444, 447, 646 Wheeling Steel Corporation, 243–244, 245 Where Are the Customers’ Yachts? (Schwed), 6 Whitbread, 719 White Motor Company, 560–562, 565, 579, 586–588 White Motor Securities Corporation, 561 White Rock Mineral Springs Company, 303, 305n, 306 White Sewing Machine Company, 306, 307, 308 Willet and Gray, 95 Williams, John Burr, 18, 364n, 476n Willys-Overland Company, 252, 330 Wilson and Company, 245, 428 Winn–Dixie Stores, 275–276 “With Icahn Agreement, Texaco Emerges from Years of Trying Times” (Potts), 272n Withholding of dividends, 378–381 Woolworth, 86 Working capital: basic rules for, 591–594 requirements for, 245–246 safety of speculative senior issues and, 327–330 World War I, interest rates and bond prices and, 25 WorldCom, 545–547, 717 Wright Aeronautical Corporation, 63, 67, 679 Wright-Hargreaves Mines, Ltd., 522–523 X Xcel Energy, 51–53 Y Yahoo!, 53 Yale University, 630–631, 710n Yield:
ixie Stores, 275–276 “With Icahn Agreement, Texaco Emerges from Years of Trying Times” (Potts), 272n Withholding of dividends, 378–381 Woolworth, 86 Working capital: basic rules for, 591–594 requirements for, 245–246 safety of speculative senior issues and, 327–330 World War I, interest rates and bond prices and, 25 WorldCom, 545–547, 717 Wright Aeronautical Corporation, 63, 67, 679 Wright-Hargreaves Mines, Ltd., 522–523 X Xcel Energy, 51–53 Y Yahoo!, 53 Yale University, 630–631, 710n Yield: relationship with risk, 164–168 sacrificing safety for, 164–168 Youngstown Sheet and Tube Company, 244, 430, 461, 462, 476n, 501, 683 Z Zero-coupon bonds, 284