Security Analysis : Sixth Edition, Foreword by Warren Buffett: Additional Aspects of Security Analysis. Discrepencies Between Price and Value

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P ART VII
A DDITIONAL
A SPECTS OF
S ECURITY A NALYSIS .
D ISCREPANCIES
B ETWEEN P RICE
AND V ALUE
Introduction to Part VII
T HE G REAT I LLUSION OF THE S TOCK M ARKET
AND THE F UTURE OF V ALUE I NVESTING
BY D AVID B ARAMS
    I n value-investing circles, you meet many people who claim to have been inspired by what Benjamin Graham and David Dodd wrote in
Security Analysis
. Most are, at the very least, stretching the truth. A fair number of aspiring and practicing value investors may indeed have devoured
The Intelligent Investor
. But I would wager that few have actually dug deeply into
Security Analysis
and fewer still have read the classic cover to cover. I have to confess that although I had delved into various parts of
Security Analysis
, I had never read it from first page to last. So when I was asked to write an introduction to Part VII , which comprises the last hundred pages of the book, it was time to do my homework. After more than 20 years as an investment professional, I finally read the value investors’ equivalent of Deuteronomy. Entitled “Additional Aspects of Security Analysis. Discrepancies between Price and Value,” Part VII covers a lot of ground: the valuation of warrants; the potential decrease in the value of a company’s common stock when it issues options to management; the