I am preparing a short post on a very interesting company which had a great day today, First Health Group (FHCC).
The post can wait.
I almost fell out of my chair as I was reading what is probably the greatest book on investing ever written - the 1940 edition of Security Analysis, by Benjamin Graham and David Dodd. Anybody who wants to invest in individual common stocks must read this book! If you aren't sure whether or not you want to invest in individual common stocks, read The Intelligent Investor, which is a simplified version of Security Analysis. Anybody who thinks that Graham and Dodd is "outdated" or "obselete" needs to read this passage from page 645 (Italics mine):
"A Dangerous Device for Diluting Stock Values. - The option warrant is a fundamentally dangerous and objectionable device because it effects an indirect and usually unrecognized dilution of common stock values. The stockholders view the issuance of warrants with indifference, failing to realize that part of their equity in the future is being taken from them. The stock market, with its usual heedlessness, applies the same basis of valuation to common shares whether warrants are outstanding or not. Hence warrants may be availed of to pay unreasonable bonuses to promoters or other insiders without fear of comprehension and criticism by the rank and file of stockholders."Messrs Graham and Dodd wrote this in 1940. Investors had about 60 years to prepare for the outlandish use of option grants by the "dot-bomb" companies. I guess we'll never learn...
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