WWII 070: The Rediscovered Benjamin Graham: Selected Writings of a Wall Street Legend, Investing in IPOs, Starboard Influences Parexel
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Main Topic: The Rediscovered Benjamin Graham by Janet Lowe Book Review
By now, every listener should be familiar with the great Benjamin Graham, the garndfather of value investing, the author of two of the greatest investing books on earth “The Intelligent Investor” and “Security Analysis”.
For the serious student of Graham who want to get their hands on as much of his material as they can find, check out the Rediscovered Benjamin Graham: Selected Writings of a Wall Street Legend.
This book was put together by Janet Lowe, the pre-emanate investing
This book is a collection of writings, lectures, articles and interviews produced by Graham over his lifetime, starting in the 1920s until his death in 1976.
Apparently, Janet was being asked by a lot of people for articles, lecture notes and other things from her Graham archive and decided to put this collection together. It is organized loosely around topics.
For some examples, Part One is about the Ethics of Business and Finance and has three articles and a speech by Graham.
Part Two is about stocks and the stock market and has copies of two speeches and two articles.
Graham was so well respected in investing circles that he was sought after as a speaker and wrote a number of widely circulated articles.
Part Three is about the profession of Investing and Graham was a huge proponent of a formal certification for professional investing. He was one of the reasons why the Chartered Financial Analyst certification was ultimately created. This section includes testimony Ben provided to the US Senate on the topic of factors affecting the buying and selling of securities.
Part Four are lecture excerpts covering the topic of investment strategy. This part alone is worth the price of the book.
Part Five is about Graham’s proposal for a reserve currency to be created based on a basket of commodities.
Part Six contains a number of interviews with Graham about various topics.
Although this book won’t give you a well rounded understanding of value investing and is not the right book to start with on the subject, it will serve to fill in some gaps in your understanding, or reinforce certain principals you picked up in some of the other books.
The book also shows you that Ben was not just the author of a book, not just a fund manager, not just a professor, not just a mentor. He was all of those things and more.
The applicability of history almost always appears after the event. When it is all over, we can quote chapter and verse to demonstrate why what happened was bound to happen because it had happened before. This is not really very helpful. The Danish philosopher Kirkegaard made the statement that life can only be judged backwards but must be lived forwards. That certainly is true with respect to our experiences in the stock market.”
Ask JB: Do I invest in Initial Public Offerings?
From Heine in Denmark: Do you invest in IPOs? I have read that many IPOs increase the first days and then on average underperform the rest of the market for several years.
JB Says: When a company goes public, there are a number of things that occur that impact valuation. First, insiders will be looking for the highest possible valuation so they can get really rich, at least on paper. Sometimes an IPO will be priced at such a rich price that all future performance is factored in, and therefore there is no margin of safety and no value to capture. The IPO is marketed heavily to drive demand on day one so the promoters can capture as much value as possible at new issue day.
You will often see an IPO pop upwards the first day or even two, then level out and decline over a period of time, especially after the lock up period expires and insiders sell (if they want to).
Most insiders will have a lock up provision on their shares of stock which means they cannot sell their stock into the IPO. Typically there is a six month lock up period.
That being said, the best time to buy into an IPO would be after six months, after insiders have sold if they are going to. You will likely get better pricing.
For me to be interested, there would have to be an IPO of a company that meets my other investment criteria. There are not many of them.
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