This week, I review the 2 important insights that Benjamin Graham and David Dodd outlined in Chapter 41 of the Security Analysis. Chapter 41 is about low-priced common stock, and the analysis of the source of income. In this chapter, Graham talks about the arithmetic advantage of low priced issues. He describes how in the stock market stocks will rise more readily from $10 to $40 than from $100 to $400. Graham also talks about how when commodity prices are rising, the high cost producer is a better bet than the low cost producer. In the video below, I explain these two takeaways from Chapter 41 of the Security Analysis.
The Security Analysis, written by Benjamin Graham and David Dodd, was the textbook that Warren Buffett used in college, when he studied under Ben Graham. Buffett attributes his investment success and valuation skills to this book.
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