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Strategies & Market Trends : Value Investing
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From: Paul Senior1/12/2009 10:18:04 PM
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Any here old enough to remember John Neff's Rule of 6's? Or maybe I should preface with anyone old enough to remember John Neff? -gg-

Looked through my stuff quickly, can't seem to find the rule.

Have got his value formula though- what he calls his "total return ratio".

Looks to me like telecom company BT might qualify on the six's rule if I remember it right-- something about buying a 6 pe and a 6% yield in a 6% inflationary environment. Not sure.

It may or may not qualify on his "value formula though". That would be to look closer at stocks greater than 2 in this formula: "growth rate" + dividend rate all divided by p/e. I've seen "growth rate" called out as earnings growth (BT shows neg earnings growth) and also as sales growth (BT to have about a 3.8% sales growth, according to analysts, down from 5.09% annually past five years (per SI). On this latter, (5.09+7.7)/6.5 < 2. This number dances around depending on what's being used for p/e and for "growth". My opinion is that if it's not obviously greater than two by a margin, then it doesn't qualify. Again, qualification doesn't by that fact make something a buy to Mr. Neff.

I can't find any "guru" and only one investing firm that has a positive (buy) opinion out on this one. Regardless, I'm in for a few BT shares as of today.

What a monstrous bureaucracy this company is -- Plenty of room for cost cutting, IF management had the will or incentive. At current and forward p/e in 6 range and a greater than 7.5% dividend yield, I'll try a few shares.

si.advfn.com^BT
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