Modern Security Analysis by Whitman, Martin J. -- Read -- Imperial Library of Trantor

Index

Cover Series Title Page Copyright Dedication Acknowledgments Introduction

OUR FOCUS CREDITWORTHINESS THE APPRAISAL OF MANAGEMENTS ACCESS TO CAPITAL MARKETS AND WEALTH CREATION THE IMPORTANCE OF CONTROL THE AVOIDANCE OF INVESTMENT RISK MARKET EFFICIENCY? DEBUNKING MYTHS YOU NEED A LOT MORE THAN KNOWLEDGE OF ALGEBRA AND THE ENGLISH LANGUAGE TO UNDERSTAND OUR APPROACH. OTHER TOPICS WE COVER IN THE BOOK

Part One: The Foundations of Modern Business and Security Analysis

Chapter 1: The Scope of Fundamental Finance, Investing, and the Investor Landscape

INVESTING VERSUS SPECULATING THE OPMI DEFINED ACTIVISTS SUMMARY

Chapter 2: A Short Introduction to the Going Concern and Resource Conversion Views of Businesses

METHODS OF WEALTH CREATION THE PURE GOING CONCERN VIEW THE RESOURCE CONVERSION VIEW SUMMARY

Chapter 3: Substantive Consolidation and Structural Subordination

SUBSTANTIVE CONSOLIDATION NOT OF PRIME IMPORTANCE THE ACCOUNTING FOR STOCK OPTIONS CONTROVERSY IN LIGHT OF THE SUBSTANTIVE CONSOLIDATION DOCTRINE STRUCTURAL SUBORDINATION NOT A SIGNIFICANT FACTOR LACK OF PROGRESS IN EUROZONE CRISIS RESOLUTION: THE FAILURE TO USE SUBSTANTIVE CONSOLIDATION SUMMARY

Chapter 4: The Substantive Characteristics of Securities

TYPES OF SECURITIES FOR ANALYTIC PURPOSES CONTROL VERSUS NON-CONTROL SECURITIES CONTROL AND NON-CONTROL PRICING AND ARBITRAGE TERMS OF SECURITIES AS OPTIONS WHAT A SECURITY IS DEPENDS ON WHERE YOU SIT SUMMARY

Chapter 5: Primacy of the Income Account or Wealth Creation? What Are Earnings, Anyway?

WEALTH OR EARNINGS? INFLUENCE OF REPORTED EARNINGS ON COMMON STOCK PRICES THE LONG-TERM EARNINGS RECORD PARSING THE INCOME ACCOUNT SUMMARY

Chapter 6: Net Asset Value: The Static and Dynamic Views

THE GRAHAM AND DODD VIEW ON NAV THE FINANCIAL ACCOUNTING VIEW ON NAV OUR VIEW ON NAV THE USEFULNESS OF NAV IN SECURITY ANALYSIS THE IMPORTANCE OF NAV DYNAMICS NAV AS ONE MEASURE OF RESOURCES NAV AS ONE MEASURE OF POTENTIAL LIQUIDITY LIMITATIONS OF NAV IN SECURITY ANALYSES LARGE PREMIUMS OVER BOOK VALUE USUALLY MEAN HIGH P/E RATIOS: IT DEPENDS ON ROE NET NETS REDEFINED OPMI INVESTING IN COMPANIES WITH GROWING NAVS SUMMARY

Chapter 7: Creditworthiness

CREDITWORTHINESS FROM THE BORROWING ENTITY POINT OF VIEW CAPITAL STRUCTURE CAPITAL STRUCTURE FROM THE CORPORATE PERSPECTIVE FACTORS AFFECTING CAPITAL STRUCTURE CONSERVATIVE CAPITAL STRUCTURES SUMMARY

Chapter 8: What Matters Is Investment Risk

THERE IS NO GENERAL RISK—ONLY SPECIFIC RISK THE COMPONENTS OF INVESTMENT RISK SUCCESSFUL PEOPLE AVOID INVESTMENT RISK METHODS TO AVOID INVESTMENT RISK SAFE AND CHEAP INVESTING AND MINIMIZING INVESTMENT RISK SUMMARY

Chapter 9: Shareholder Distributions from the Company Point of View

CASH DIVIDENDS OR RETAINED EARNINGS STOCK DIVIDENDS STOCK REPURCHASES DISTRIBUTION OF ASSETS OTHER THAN CASH LIQUIDATION SUMMARY

Chapter 10: Roles of Cash Dividends in Security Analysis and Portfolio Management

THE THREE CONVENTIONAL THEORIES CASH DIVIDENDS AS A FACTOR IN MARKET PERFORMANCE THE PLACEBO EFFECT OF CASH DIVIDENDS CASH DIVIDENDS AND PORTFOLIO MANAGEMENT CASH DIVIDENDS AND LEGAL LISTS CASH DIVIDENDS AND BAILOUTS THE GOALS OF SECURITIES HOLDERS SUMMARY

Chapter 11: The Appraisal of Managements and Growth: GARP versus GADCP

NEW FRAMEWORK FOR THE APPRAISAL OF MANAGEMENTS MANAGEMENTS ATTUNED TO OPMI INTERESTS MANAGEMENTS AS RESOURCE CONVERTERS TRADEOFFS GROWTH: GARP VERSUS GADCP GROWTH AT A REASONABLE PRICE (GARP) GROWTH AT DIRT CHEAP PRICES (GADCP) SUMMARY

Chapter 12: The Significance (or Lack of Significance) of Market Performance

MARKET PERFORMANCE AND THE CHARACTER OF A PORTFOLIO MARKET PERFORMANCE OF PORTFOLIOS VERSUS INDIVIDUAL SECURITIES OUTSIDERS, INSIDERS, AND MARKET PRICE PROFESSIONAL MONEY MANAGERS AND BEATING THE MARKET PERSPECTIVE ON BAILOUTS AND THE SIGNIFICANCE OF MARKET PERFORMANCE SUMMARY

Chapter 13: How Much Diversification?

PORTFOLIO DIVERSIFICATION VERSUS SECURITIES CONCENTRATION CORPORATE DIVERSIFICATION VERSUS CONCENTRATION SUMMARY

Chapter 14: Toward a General Theory of Market Efficiency

THE DETERMINANTS OF MARKET EFFICIENCY EXTERNAL FORCES INFLUENCING MARKETS EXPLAINED GREAT ECONOMISTS CAN LEARN A LOT FROM VALUE INVESTORS MARKETS WHERE EXTERNAL DISCIPLINES SEEM TO BE LACKING MARKET EFFICIENCY AND FAIR PRICES IN TAKEOVERS SUMMARY

Part Two: Putting It All Together: Safe and Cheap Investing versus Conventional Approaches

Chapter 15: Safe and Cheap Investing

THE SAFE AND CHEAP APPROACH BENEFITS OF THE SAFE AND CHEAP APPROACH FOR THE OPMI RESTRICTIONS AND DEMANDS OF THE SAFE AND CHEAP APPROACH SUMMARY

Chapter 16: Graham and Dodd Placed in Context

THE OPMI DEFINED THE OPMI PERSPECTIVE OF ANALYSIS THE GOING CONCERN AND INVESTMENT COMPANY VIEWS OF BUSINESSES PRIMACY OF THE INCOME ACCOUNT AND WEALTH CREATION PRIMACY OF THE INCOME ACCOUNT, DIVIDENDS, AND CORPORATE USES OF CASH PRIMACY OF THE INCOME ACCOUNT AND THE APPRAISAL OF MANAGEMENTS PRIMACY OF THE INCOME ACCOUNT AND TOP-DOWN VERSUS BOTTOM-UP ANALYSIS PRIMACY OF THE INCOME ACCOUNT AND DIVERSIFICATION PRIMACY OF THE INCOME ACCOUNT AND GROWTH STOCKS MARKET RISK VERSUS INVESTMENT RISK AND MARGIN OF SAFETY THE IMPORTANCE OF MARKET PERFORMANCE USES AND LIMITATIONS OF FINANCIAL ACCOUNTING SUBSTANTIVE CONSOLIDATION COMPENSATION OF PROMOTERS DO STOCK MARKET PRICES REFLECT CORPORATE VALUES? TRADE-OFFS MODERN CAPITAL THEORY VERSUS GRAHAM AND DODD SUMMARY

Chapter 17: Academic Finance: Modern Capital Theory

THE MCT POINT OF VIEW EQUILIBRIUM PRICING IS UNIVERSALLY APPLICABLE THE OUTSIDE PASSIVE MINORITY INVESTOR IS THE ONLY RELEVANT MARKET DIVERSIFICATION IS A NECESSARY PROTECTION AGAINST UNSYSTEMATIC RISK SYSTEMATIC RISK EXISTS VALUE IS DETERMINED BY FORECASTS OF DISCOUNTED CASH FLOWS COMPANIES ARE ANALYZED BASICALLY AS GOING CONCERNS; INVESTORS IN MARKETABLE SECURITIES ARE ANALYZED AS INVESTMENT COMPANIES INVESTORS ARE MONOLITHIC: THEIR UNITARY GOAL IS RISK-ADJUSTED TOTAL RETURN, EARNED CONSISTENTLY MARKET EFFICIENCY MEANS AN ABSENCE OF MARKET PARTICIPANTS WHO EARN EXCESS RETURNS CONSISTENTLY OR PERSISTENTLY GENERAL LAWS ARE IMPORTANT RISK IS DEFINED AS MARKET RISK MACRO CONSIDERATIONS ARE IMPORTANT CREDITOR CONTROL IS A NONISSUE TRANSACTION COSTS ARE A NONISSUE FREE MARKETS ARE BETTER THAN REGULATED MARKETS THE OUTSIDE PASSIVE MINORITY INVESTOR MARKET IS BETTER INFORMED THAN ANY INDIVIDUAL INVESTOR MARKETS ARE EFFICIENT OR AT LEAST TEND TOWARD AN INSTANTANEOUS EFFICIENCY SUMMARY

Chapter 18: Broker-Dealer Research Departments and Conventional Money Managers

HOW RESEARCH DEPARTMENTS AND CONVENTIONAL MONEY MANAGERS THINK PROBLEMS FACED BY RESEARCH DEPARTMENTS AND CONVENTIONAL MONEY MANAGERS SUMMARY

Part Three: Real-World Considerations

Chapter 19: Uses and Limitations of Financial Accounting

THE CONVENTIONAL APPROACHES FINANCIAL ACCOUNTING REPORTS AS OBJECTIVE BENCHMARKS GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AS DEFINING REALITY FOR CERTAIN SPECIFIC PURPOSES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AS A ROAD MAP FOR DUE DILIGENCE AND LESS THOROUGH INVESTIGATIONS SUMMARY

Chapter 20: Company Disclosures and Information: Following the Paper Trail in the United States

NARRATIVE DISCLOSURES IN THE UNITED STATES THE DOCUMENTS AND HOW TO READ THEM WHAT THE PAPER TRAIL DOES FOR THE OUTSIDE INVESTOR WHAT THE PAPER TRAIL DOESN’T DO HOW GOOD IS THE PAPER TRAIL? SUMMARY

Chapter 21: Buying Securities in Bulk

METHODS FOR ACQUISITION OF COMMON STOCKS ACQUISITION OF VOTING EQUITIES THROUGH EXCHANGES OF SECURITIES ACQUISITION OF CONTROL WITHOUT ACQUIRING SECURITIES BY USING THE PROXY MACHINERY SUMMARY

Part Four: Understanding Resource Conversion

Chapter 22: A Short Primer on Resource Conversion

LONG-TERM ARBITRAGE BETWEEN OPMI PRICES AND CONTROL VALUES MORE AGGRESSIVE EMPLOYMENT OF EXISTING ASSETS MERGER AND ACQUISITION ACTIVITY CORPORATE CONTESTS FOR CONTROL GOING PRIVATE AND LEVERAGED BUYOUTS SUMMARY

Chapter 23: Restructuring Troubled Companies

THE FIVE BASIC TRUTHS OF DISTRESS INVESTING REHABILITATION OF TROUBLED ENTITIES SUMMARY

Chapter 24: The Role of Government in Reorganizations

BAILOUTS OR CAPITAL INFUSIONS? TOO BIG TO FAIL IS A PHONY CONCEPT THE GOVERNMENT AND PRIVATE SECTOR ARE IN PARTNERSHIP WHETHER THEY LIKE IT OR NOT WALL STREET PROFESSIONALS AND CORPORATE EXECUTIVES ARE ALL IN THE BUSINESS OF CREATING MORAL HAZARDS TAXPAYER BAILOUTS ARE A PHONY CONCEPT A REVOLUTION IN CORPORATE REORGANIZATIONS AND LIQUIDATIONS MAY HAVE OCCURRED IN 2009 WITH THE CHAPTER 11 REORGANIZATIONS OF GENERAL MOTORS, CHRYSLER, AND CIT CORPORATION STRICT REGULATION OF FINANCIAL INSTITUTIONS IS ABSOLUTELY NECESSARY SUMMARY

Part Five: Active Investors Buy and Sell Common Stocks on an Advantageous Basis

Chapter 25: The Economics of Private Equity Leveraged Buyouts

THE 2005 ACQUISITION OF HERTZ GLOBAL HOLDINGS AND SUBSEQUENT EVENTS AS A PRIME EXAMPLE SUPER-ATTRACTIVE ACCESS TO CAPITAL MARKETS CASH PAYMENTS TO SPONSORS AND SPONSOR-CONTROLLED FUNDS SPONSORS CONTROL OF HERTZ SPONSORS ATTUNED TO THE NEEDS OF BANKERS AND THE WALL STREET UNDERWRITING COMMUNITY QUESTIONS ABOUT LBOS SUMMARY

Chapter 26: The Use of Creative Finance in a Corporate Takeover

THE CASE THE POSTSCRIPT INVESTMENT LESSONS THE APPRAISAL OF MANAGEMENT SPOTTING DOABLE DEALS SUMMARY

Chapter 27: The Use of Creative Finance to Benefit Controlling Stockholders

THE PROBLEMS FACED IN THE SCHAEFER CORPORATION DEAL THE BACKGROUND OF THE DEAL DISCOUNT PURCHASES OF RESTRICTED CORPORATE STOCK CORPORATION’S ACQUISITION OF BREWING PROBLEMS AND WEALTH CREATION POTENTIALS FOR THE PARTIES IN INTEREST SUMMARY

Glossary of Acronyms About the Authors Index

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