1 de Julio de 2010

Instead of associating bonds primarily with the presumption of safety, it would be sounder to start with what is not presumption but fact, viz., that a bond is an investment with limited return. In exchange for limiting its participation in future profits, the bondholder obtains a prior claim and a definit promise of payment, while the preferred stockholder obtains only the priority, without the promise. But neither priory nor promise is itself an assurance of payment. This assurance rests in the ability of the enterprise to fulfill its promise, and must be looked for in its financial position, record, and prospects. The essence of proper bond selection constits, therefore, in obtaining specific and convincing factors of safety in compensation for the surrender of participation in profits.

Security Analysis, Benjamin Graham & David Dodd, 1940, p. 79