The Intelligent Investor: The Definitive Book On Value part 40. 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 | CHAPTER 15 Stock Selection for the Enterprising Investor In the previous chapter we have dealt with common-stock selection in terms of broad groups of eligible securities from which the defensive investor is free to make up any list that he or his adviser prefers provided adequate diversification is achieved. Our emphasis in selection has been chiefly on exclusions advising on the one hand against all issues of recognizably poor quality and on the other against the highest-quality issues if their price is so high as to involve a considerable speculative risk. In this chapter addressed to the enterprising investor we must consider the possibilities and the means of making individual selections which are likely to prove more profitable than an across-the-board average. What are the prospects of doing this successfully We would be less than frank as the euphemism goes if we did not at the outset express some grave reservations on this score. At first blush the case for successful selection appears self-evident. To get average results . equivalent to the performance of the DJIA should require no special ability of any kind. All that is needed is a portfolio identical with or similar to those thirty prominent issues. Surely then by the exercise of even a moderate degree of skill derived from study experience and native ability it should be possible to obtain substantially better results than the DJIA. Yet there is considerable and impressive evidence to the effect that this is very hard to do even though the qualifications of those trying it are of the highest. The evidence lies in the record of the numerous investment companies or funds which have been in operation for many years. Most of these funds are large enough to command the services of the best financial or security analysts in the field together with all the other constituents of an adequate research department. Their expenses of operation when spread 376 Stock Selection for the Enterprising Investor 377 .
