Jan 15, 2017 · 7 min read

**Quick update** Thanks for reading, I’ve compiled this entire series into an electronic copy that you can take offline →"); background-size: 1px 1px; background-position: 0px calc(1em + 1px);" target="_blank"> here

Welcome back to the Intelligent Investor series. In this chapter of "); background-size: 1px 1px; background-position: 0px calc(1em + 1px);" target="_blank">The Intelligent Investor, Graham turns his attention to those that will often influence the investor’s buying and selling decisions. Whether you’re an enterprising investor, or a defensive investor, being an Intelligent Investor also means understanding the motives, knowledge and credentials of those that help you make your investment decisions. Here’s the list of preceding posts if you’d like to get caught up:

• "); background-size: 1px 1px; background-position: 0px calc(1em + 1px);" target="_blank">Intro and Chapter 1 , "); background-size: 1px 1px; background-position: 0px calc(1em + 1px);" target="_blank">Chapter 2, "); background-size: 1px 1px; background-position: 0px calc(1em + 1px);" target="_blank">Chapter 3, "); background-size: 1px 1px; background-position: 0px calc(1em + 1px);" target="_blank">Chapter 4, "); background-size: 1px 1px; background-position: 0px calc(1em + 1px);" target="_blank">Chapter 5, "); background-size: 1px 1px; background-position: 0px calc(1em + 1px);" target="_blank">Chapter 6, "); background-size: 1px 1px; background-position: 0px calc(1em + 1px);" target="_blank">Chapter 7, "); background-size: 1px 1px; background-position: 0px calc(1em + 1px);" target="_blank">Chapter 8, "); background-size: 1px 1px; background-position: 0px calc(1em + 1px);" target="_blank">Chapter 9

Graham uses this chapter to set the stage for Chapter 11 which has a technical focus on stock analysis. Although this chapter is relatively short , there are a number of fundamental takeaways within it that boil down to the following: The Answers You Seek and Where Answers Are Found.

Where Answers Are Found

Graham states that the investor can find answers in the following five areas. I’ve updated item four with internet and television given the popularity for investors and speculators alike to use these mediums as a means to help form their investment decisions.

Advice can be found from :

1. A relative or a friend, presumably knowledgable in securities
2. A local (commercial) banker
3. A brokerage firm or investment banking house
4. A financial service or periodical, internet and television
5. An investment counselor

Graham tackles advice from “Investment Counsel and Trust Services of Banks” first. He believes that their biggest value-add to their customers is that they typically shield their customers from themselves. The point he makes here is that these firm’s have the primary goal of protecting their customers’ principal; not exactly to try and return massive percentages. Zweig adds some commentary here that, today, many of these types of advisory firms cater primarily to $1M+ investors. He feels that to the detriment of the customer, “diversification” has replaced “quality” as the standard of safety. While Graham may agree that diversification can play a hearty role in a wise investment policy, I doubt he’d emphasize diversification over quality.

More information can be gleaned from “Financial Services” that specialize in producing informative reports and guidance for those directing their own financial affairs or are advising others themselves. Graham remarks that firms that only specialize in using “technical” methods are to be disregarded as “their work does not concern “investors” as the term is used in this book”. Graham appears pretty cynical about the value these “Financial Services” offer, he focuses on the fact that the average speculator-investor in the market mainly wants to be informed by someone (often anyone) with some type of authority about what the market will do. Since this need exists, the “Financial Services” businesses are there to satisfy the demand. He delves deeper by remarking that what these firms do best is highlight the need humans have to be told what to do , and how to make money by someone else. In short:

The intelligent investor will not do his buying and selling solely on the basis of recommendations received from a financial service. Once this point is established , the role of the financial service then becomes the useful one of supplying information and offering suggestions.

Graham moves on to looking at gaining advice from Brokerage Houses. He defines this type of knowledge acquisition as a Brokerage House client gaining insights into investment picks and information directly from the Brokerage House through their “registered representative”. Typically, much of the investing public falls into this category and there are definitely ways for the public to use the information to their advantage; as long as they are clear about their objectives to invest, not to speculate. Graham remarks that because most of the profitable customers want speculative advice and suggestions , the thinking and activities of the typical firm are geared for a day-to-day trading in the market, which is positively not the type of advice Graham would give. He doubles down on this belief when he calls attention to the fact that the “registered representative” typically gets paid on commission, therefore, the representative is biased to be speculative-minded. Fortunately, the following advice is given to capitalize on the wealth of knowledge held in these institutions:

…the security buyer who wants to avoid being influenced by speculative considerations will ordinarily have to be careful and explicit in his dealing with his broker; he will have to show clearly, by word and deed, that he is not interested in anything faintly resembling a stock-market “tip”. Once the customer’s broker understands clearly that he has a real investor on his hands, he will respect this point of view and cooperate with it.

Moving into the realm of working with Investment banks, Graham expounds on their ability to do something admirable: moving money into markets with potential to grow and positively impact society. Certainly, this section of the reading is interesting to those of us that are stringent followers of Free Market philosophy so, I’ll leave the reader to focus their own attention on those remarks within the text. Although he states the following in the section on Investment Banks, I think this advice applies to all portions of this chapter:

The intelligent investor will pay attention to the advice and recommendations received from investment banking houses, especially those known by him to have an excellent reputation; but he will be sure to bring sound and independent judgement to bear upon these suggestions — either his own, if he is competent, or that of some other type of adviser.

Advising for the Defensive and Aggressive investor

We’ve now seen the different avenues each investor has at his disposal to gain information and advice about their investment decision. Graham breaks down how he thinks the Defensive investor should leverage the information that’s available to him.

He believes that, because the defensive investor works in the realm of a more passive investment strategy, he’s unlikely to challenge or give healthy review to his advisor’s recommendations. Rather, he would do well to follow the prescription of high-grade bonds and the common stocks of leading corporations that can be purchased a levels that are considerably low based on the perceptions of experience and analysis. Leveraging a security analyst, he should be able to procure a listing of these types of common stocks and be confident that the existing price levels of those recommendations are reasonably conservative based on the analyst’s past experience.

The aggressive investor should work in tandem with his advisers. He should leverage them to make suggestions , and to do the heavy lifting of finding rather suitable issues and then insist on making his own judgement on those findings. Therefore, the aggressive investor should be comfortable, and confident in taking lead of his own judgement of these issues, being able to validate , or deny any recommendation from his advisers. This means the aggressive investor is required to be at least at the same level of knowledge of his advisers, but not necessarily of the exact mindset and philosophy of those advisers as he is the one who will make the final buy decision. Very rarely, and only in extenuating circumstances and through the previous demonstration of the competence of his advisers will the aggressive investor act on the advice of his advisers without understanding and approving the decisions being made. I would hazard to guess few investors should ever find themselves in such a situation. Leverage your advisers for their knowledge, let them do the heavy lift of finding a good list of potential investments then, with your own arsenal of investment knowledge make the final valuation analysis and decision.

As I continue to work through the chapters, my goal is to post on each chapter’s central tenets. If you find something out of place, or care to strike up a discussion feel free to comment or find me on twitter "); background-size: 1px 1px; background-position: 0px calc(1em + 1px);" target="_blank">@DavidCappelucci.

Recommend the article if you found value in it and would like to follow along.

-David

Calvin comments:

In i3 forum there are many counsellors, stock tipsters ^ self styled gurus and also lots of helpful Sifus Calvin leant alot from

But these 3 you all must be on guard

1) qqq3 : A lapsap talker & attacker

2) 3iii.  This one has chased blue chips to the stratosphere & still don't know stocks are overvalued like Dlady at Rm76.00 & Padini over Rm6.00

Sifu Peter Lynch gives this advise

Medium growers (stalwarts)

“These multibillion-dollar hulks are not exactly agile climbers, but they’re faster than slow growers.” Lynch expected stalwarts to deliver gains of 30% to 50%, after which he would sell them and find new, undervalued issues. He also expected annual earnings growth of 10% to 12% and liked to keep some stalwarts in his portfolio because they offer defensive protection during market slumps: “You know they won’t go bankrupt, and soon enough they will be reassessed and their value will be restored.”

So Dlady at Rm76.00 & padini above Rm6.00 should both be sold

3iii did not. Yet he goes round telling people how clever he is

He knows nothing about his "BIG EGO" that blinded his mind. 

See https://klse.i3investor.com/blogs/www.eaglevisioninvest.com/2019-12-03-story242906-THE_PROBLEM_OF_3iii_IS_HE_HAS_TUNNEL_VISION_IN_INVESTMENT_HE_CANNOT_SEE_WHAT_OTHERS_SEE.jsp

3) PHILIP

This is not Sifu but See Fool

He talks a lot but picked the wrong stock like Petchem (oil downstream) while OGSE UPSTREAM WENT INTO A BULL RUN

Still does not realise his error yet go round teaching others (both our friends SSLee & Jon Choivo also drawn in to his trap of descending performance)

See his self proclaimed (HAUGHTY FALLING STOCKS)

Philip ( 2.3% fatality rate, 80% recovery rate age 10-40)'s Portfolio: S=QR PHILIP SHARED ONLINE PORTFOLIO 2019     Stock Name   Last Price Change Shares Market Value % Average Cost Per Share Unrealized Gain % Day Gain % $CASH   475,552.01 0.80%   Total   59,810,649.01 100.00%      GKENT MYR 0.78 +0.025 2,820,000 2,199,600.00 3.68% 2,815,714.43 0.998 -616,114.43 -21.88% +70,500.00 3.31%    PCHEM MYR 4.72 +0.37 4,693,200 22,151,904.00 37.04% 31,569,034.59 6.726 -9,417,130.59 -29.83% +1,736,484.00 8.51%    QL MYR 8.09 +0.10 1,360,500 11,006,445.00 18.40% 9,353,256.00 6.874 +1,653,189.00 17.68% +136,050.00 1.25%    SERBADK MYR 1.93 +0.08 500,000 965,000.00 1.61% 1,173,651.50 2.347 -208,651.50 -17.78% +40,000.00 4.32%    TOPGLOV MYR 6.28 +0.18 2,043,800 12,835,064.00 21.46% 11,210,831.48 5.485 +1,624,232.52 14.49% +367,884.00 2.95%    YINSON MYR 6.46 +0.16 1,575,400 10,177,084.00 17.02% 8,686,754.98 5.513 +1,490,329.02 17.16% +252,064.00 2.54%

ALREADY LOST RM9.4 MILLIONS IN PETCHEM ALONE THIS PORTFOLIO MIGHT EVENTUALLY PUNCH A BIG HOLE IN PHILIP WHEN LOSSES BALLOONED TO RM20 MIILLIONS OR MORE AS US GOING INTO A BIG CRASH!

Who are we to follow?

KcChongNz (Very sound and sane)

MG9231 (sorry he seldom post due to naysayers)

OTB if you can follow him  buy before Cyclical goes up (But don't overstay)

Icon8888 (Some good, some mediocre) Generally ok (bad ones infrequent)

StockRaider ( See when he does his leechtech. Hitching on next growth story) He has street wisdom. Having worked under Sifu Dr Neoh Soon Kean before so he has practical wisdom

Uncle KYY (A hobby horse investor. Can follow him buy in early stage. But cannot follow tilll the very end as they all at peak prices end in disaster later) Note: Uncle Koon best advise is to eat pineapple to cleanse your blood vessle

BEST REGARDS

Calvin Tan Research

Please do your own deduction and conclusion

YOU ARE YOUR OWN BEST INVESTOR. SO PLEASE GO LEARN