3 ideas
An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return; operations not meeting these requirements are speculative. The distinction lies in the analysis and the margin of protection behind the commitment, not in the type of security bought, so a bond bought without analysis can be speculation and a common stock bought on sound analysis can be investment.
A bond's safety depends on the issuer's demonstrated ability to meet its obligations, measured by how many times average earnings cover fixed charges across good and bad years. Specific liens and contractual protections do not create that safety. When earnings fail, the mortgage lien mostly determines who gets hurt in the reorganization rather than preventing the loss, so the analyst should reject any bond the business itself cannot support.
In the short run the market acts as a voting machine, registering the shifting popularity of a security. The analyst estimates intrinsic value from those facts as an approximate range, not an exact figure. A security becomes attractive only when its price falls well enough below that range to leave room for error and bad luck.