The Intelligent Investor, Rev. Ed

you must thoroughly analyze a company, and the soundness of its underlying businesses, before you buy its stock;
you must deliberately protect yourself against serious losses;
you must aspire to “adequate,” not extraordinary, performance

An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return

third and final example of the golden opportunities not recently available: A good part of our own operations on Wall Street had been concentrated on the purchase of bargain issues easily identified as such by the fact that they were selling at less than their share in the net current assets (working capital) alone, not counting the plant account and other assets, and after deducting all liabilities ahead of the stock. It is clear that these issues were selling at a price well below the value of the enterprise as a private business

Buy cheap and sell dear.” And it had the advantage of running directly counter to the ingrained and pernicious maxim of Wall Street that stocks should be bought because they have gone up and sold because they have gone down

But with the multiplication of merger announcements came a multiplication of obstacles to mergers and of deals that didn’t go through; quite a few individual losses were thus realized in these once-reliable operations

The most typical case is a projected merger or acquisition which offers a substantially higher value for certain shares than their price on the date of the announcement

Buying a neglected and therefore undervalued issue for profit generally proves a protracted and patience-trying experience. And selling short a too popular and therefore overvalued issue is apt to be a test not only of one’s courage and stamina but also of the depth of one’s pocketbook

common stock may be undervalued because of lack of interest or unjustified popular prejudice

speculative stock movements are carried too far in both directions,

To enjoy a reasonable chance for continued better than average results, the investor must follow policies which are (1) inherently sound and promising, and (2) not popular on Wall Street.