What are the potential risks of investing in IPOs of small and nondescript companies as discussed in 'The Intelligent Investor'?

In 'The Intelligent Investor', the comparison between the stock values of IPOs and medium-sized enterprises with a long history is used to illustrate the risks associated with investing in IPOs, particularly during bull markets. The author, Benjamin Graham, warns that IPOs often have higher built-in commissions and are usually sold near the peak of a bull market. This can lead to a frenzy for subsequent IPOs, with even small and nondescript companies having stock values higher than established medium-sized enterprises. This is a clear sign of the end of a bull market, as the prices of these new stocks often crash to new lows. Therefore, Graham advises investors to avoid such costly speculation.

According to 'The Intelligent Investor', one way to protect your capital from loss is by avoiding the purchase of Initial Public Offerings (IPOs), especially during bull markets. The book suggests that IPOs often have a higher built-in commission, making them a harder sell. Additionally, new issues are typically sold near the peak of a bull market, which can lead to a frenzy for subsequent IPOs. This can result in the prices of these new stocks crashing to new lows. Therefore, the book advises investors to steer clear of this type of costly speculation.