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2. Security analysis by Ben Graham
...Wait a second...I thought you said fixed income, not equities!
We believe in the simple idea that when you’re buying a stock, you’re in fact buying a fractional ownership interest in a business. Rather than worry about interest rates, yield curves, bonds sectors, or spreads, it seems like an equally simple idea to think of fixed income investing as what it really is: lending money to that same business. If you want to learn about fixed income, you should first learn about assessing a business.
These three authors are all famous “value” investors who are presumed to be great stock pickers when in fact each would attribute a meaningful portion of their success to corporate bond investing. Common across all of them is the idea, originated by Benjamin Graham, of investing with a “margin of safety” – or buying a stock for less than its business is intrinsically worth. Once you grasp the idea of investing with a margin of safety from an equity perspective (by buying a stock only when it’s trading at a discount), it’s not a huge leap to apply the same technique in corporate bond investing. It’s really hard to consistently lose money when you lend to a business if the amount being lent is a small fraction of total business value.