#BenjaminGraham's book Security Analysis is considered the bible of value investing. It contains over 800 pages. There are 6 editions of the book, the first written in 1934 and the last in 2008. One question I had is: which edition should I read?
What I ended up doing was buying both the 2nd version and the 6th version and here's why. #WarrenBuffet himself recommends the 2nd version of the book as it is the last version where the original authors, Graham and Dodd are the sole authors of the book. The other editions have additional co-authors and contributors, while the 6th edition is the most criticized, as it removed a total of 11 chapters from the original editions.
While reading the 2nd edition, I found it difficult to relate security analysis concepts to today's environment as a new investor. Graham's method for valuing stocks relied on balance sheet and income statement analysis, with an emphasis on hard assets and earnings (and therefore P/E ratios) relative to bond yields. In today's world, free cash flow plays a fundamental role in business valuation, in combination with balance sheet and income statement analysis.
What's nice about the 6th edition is the introductions and commentaries to each chapter written by modern investors, which I think makes up for the fact that the original editions are missing 11 chapters. There is also a foreword by Warren Buffet and a preface by Seth Klarman which are quite informative. These introductions are very useful, as they take classic concepts from the book and apply them to recent history with many relevant examples.
In summary, if you are just starting out, I recommend getting the 2nd and 6th editions. Read the 2nd one or more times until you feel comfortable with the concepts, then read the 6th edition's foreword, preface, and introductions at the beginning of the 9 chapters. You'll see how everything will make a lot more sense and how investors other than Warren Buffet have applied the lessons of Graham and Dodd's original security analysis.
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