The Intelligent Investor: The Definitive Book On Value part 18. The purpose of this book is to supply, in a form suitable for laymen, guidance in the adoption and execution of an investment policy. Comparatively little will be said here about the technique of analyzing securities; attention will be paid chiefly to investment principles and investors’ attitudes. We shall, however, provide a number of condensed comparisons of specific securities - chiefly in pairs appearing side by side in the New York Stock Exchange list in order to bring home in concrete fashion the important elements involved in specific choices of common stocks | 156 The Intelligent Investor Operations in Common Stocks The activities specially characteristic of the enterprising investor in the common-stock field may be classified under four heads 1. Buying in low markets and selling in high markets 2. Buying carefully chosen growth stocks 3. Buying bargain issues of various types 4. Buying into special situations General Market Policy Formula Timing We reserve for the next chapter our discussion of the possibilities and limitations of a policy of entering the market when it is depressed and selling out in the advanced stages of a boom. For many years in the past this bright idea appeared both simple and feasible at least from first inspection of a market chart covering its periodic fluctuations. We have already admitted ruefully that the market s action in the past 20 years has not lent itself to operations of this sort on any mathematical basis. The fluctuations that have taken place while not inconsiderable in extent would have required a special talent or feel for trading to take advantage of them. This is something quite different from the intelligence which we are assuming in our readers and we must exclude operations based on such skill from our terms of reference. The 50-50 plan which we proposed to the defensive investor and described on p. 90 is about the best specific or automatic formula we can recommend to all investors under the conditions of 1972. But we have retained a broad leeway between the 25 mini- approaching bankruptcy its common stock becomes essentially worthless since . bankruptcy law entitles bondholders to a much stronger legal claim than shareholders. But if the company reorganizes successfully and comes out of bankruptcy the bondholders often receive stock in the new firm and the value of the bonds usually recovers once the company is able to pay interest again. Thus the bonds of a troubled company can perform almost as well as the common stock of a healthy company. In these special situations
