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Strategies & Market Trends : Value Investing

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To: Michael Burry who started this subject	2/20/2002 12:25:09 AM
From: llackey	Read Replies (1) of 78659

Benchmark Investing is a method of deriving a downside and upside target price based on 5 to 10 years of historical Price, Book Value and ROE data. Benchmark Investing (BI) was introduced in Ken Lee's book "Trouncing The Dow". BI buys stocks under their downside price with strong earnings (>10%). BI has been backtested to 1973 on the Dow with an average return of 26% per year. I've started recently tracking members of the MidCap S&P 400. I have about half the companies in my spreadsheet. I use ValueLine (VL) as my source data. Here is the table with the companies that are under their 10 Yr downside target price. Price 10Yr 10Yr Price/ 5Yr 5Yr Price/ 04-06 04-06 EPS Buffett Ticker Update 2/19 Down Up 10YDwn Down Up 5Y Dwn Down Up Growth Int Val Industry Name BRL 1/25 63.3 105.00 247.08 -40% 84.41 205.57 -25% 133.44 314.00 70% 98.88 DRUG Barr Laboratories TDS 1/4 83.15 125.39 206.16 -34% N/A N/A N/A 203.83 335.12 13% 62.50 TELESERV Telephone & Data Systems PHSY 12/28 15.34 22.78 52.29 -33% 22.19 58.45 -31% 31.92 73.27 56% 71.83 MEDSERV PacifiCare Health Sys SRP 2/15 15.06 21.63 28.60 -30% 27.42 39.17 -45% 25.96 34.32 2633% -27.99 UTILWEST Sierra Pacific Resources (New) TSN 2/8 12.6 17.94 27.76 -30% 20.62 33.42 -39% 35.83 55.44 164% 21.46 FOODPROC Tyson Foods UCU 1/4 23.05 31.71 44.36 -27% 27.69 43.10 -17% 43.14 60.35 23% 73.69 UTILCENT UtiliCorp United WEC 1/4 23.62 31.93 40.70 -26% 34.42 46.85 -31% 37.01 47.17 22% 0.00 UTILCENT Wisconsin Energy IVX 1/25 17.6 23.56 53.11 -25% 23.57 61.85 -25% 37.89 85.41 20% 23.32 DRUG IVAX Corp. ETS 1/18 4.05 5.41 13.70 -25% 10.63 44.35 -62% 7.98 20.19 -22% 9.33 COMPUTER Enterasys Networks BKS 2/15 29.6 38.00 74.56 -22% 30.07 64.66 -2% 66.09 129.67 88% N/A RETAILSP Barnes & Noble CREE 1/18 14.2 17.48 67.11 -19% 13.61 53.26 4% 61.11 234.64 -28% 3.73 SEMICOND Cree Inc. OHP 12/28 39.15 48.09 113.65 -19% N/A N/A N/A 56.77 134.18 6% 63.43 MEDSERV Oxford Health Plans PAS 2/8 12.64 15.25 21.94 -17% 19.59 31.14 -35% 19.02 27.38 64% 27.99 BEVERAGE PepsiAmericas, Inc. LNT 1/4 29.05 34.33 42.80 -15% 34.80 45.09 -17% 37.45 46.68 21% 0.93 UTILCENT Alliant Energy OCR 1/4 22.09 25.80 51.32 -14% 22.94 46.76 -4% 40.21 79.96 35% 29.85 DRUGSTOR Omnicare, Inc. BTH 1/11 21.36 24.75 43.54 -14% 22.25 37.51 -4% 33.06 58.15 2% 41.04 HOUSEPRD Blyth Inc. YRK 2/1 37.24 42.10 63.47 -12% 34.03 58.92 9% 68.36 103.05 12% 66.23 MACHINE York International PSD 2/15 20.65 23.14 30.57 -11% 24.31 33.89 -15% 27.26 36.01 73% 28.92 UTILWEST Puget Energy, Inc. (Hldg. Co.) GLT 1/11 15.66 17.03 25.42 -8% 14.39 22.74 9% 22.61 33.75 15% 21.46 PAPER Glatfelter GSB 1/25 29.31 31.62 63.04 -7% 29.10 60.29 1% 40.40 80.53 21% N/A THRIFT Golden State Bancorp PRGO 1/25 10.88 11.62 22.94 -6% 11.30 22.02 -4% 19.46 38.42 -5% 11.19 DRUG Perrigo Co. GXP 1/4 25.52 26.38 32.56 -3% 27.63 33.97 -8% 30.82 38.04 19% 57.84 UTILCENT Great Plains Energy Inc. AIN 2/1 24.88 25.55 40.26 -3% 20.00 33.78 24% 35.38 55.75 18% 37.31 MACHINE Albany International SSSS 2/1 17.39 17.63 33.67 -1% 17.86 39.46 -3% 52.42 100.07 -12% 15.86 MACHINE Stewart & Stevenson Services BKH 2/15 26.39 26.67 41.83 -1% 24.76 43.27 7% 35.60 55.83 -37% -76.49 UTILWEST Black Hills Ticker, Industry & Name are pretty self explanatory. Update is the date of the last data update from Valueline. Fresher data is always better. Price (date) is the 4:00PM closing price of the stock on the date indicated. 10 Yr Down is the 10 year downside price. The company must have at least 7 years of non-negative ROE data to qualify. 10 Yr Upside is the 10 year upside price. Both upside and downside are calculated using method outlined in Trouncing The Dow book and BI website. Price/10YDwn is the price divided by the 10 Yr downside expressed as a percentage. 5Yr Down is the 5 year downside price. The company must have at least 4 years of non-negative ROE data to qualify. 5Yr Up is the 5 year upside price. Based on Ken Lee's findings that the 5 year method works as well as the 10 yr method and also tends to pick more stocks during long bull markets. Price/5Y Dwn is the price divided by the 5 Yr downside expressed as a percentage. 04-06 Down is the 2004-2006 downside price which is calculated using the projections of Book Value and ROE for 2004-2006. 04-06 Up is the 2004-2006 upside price. If a stock's current price reaches this level, then that is considered a sell signal. EPS Growth is the projected growth in EPS for the next 4 quarters versus the last four reported quarters. I depart from the normal TTD method which is to use the VL sheet figures. I use the latest EPS data from the VL spreadsheet which is updated as soon as new earnings are reported. Buffett Int Val is the "discounted cashflow valuation" that Buffett uses as a quick and dirty intrinsic value calculation. This is discussed on pages 77-78 of Trouncing the Dow. Basically (Cash Flow/Share - Cap Spending/Share)/long term interest rate. I use the 30 Yr rate. Using BI as a starting point, I recently bought BRL. BRL looks strong as both a BI pick as well as a cash flow play plus they have gained FDA approval for a series of new generics. Any thoughts... - Lee Downside targets for Dow stocks are freely available at benchmarkinvesting.com

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