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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (37345)4/11/2010 8:19:23 PM
From: E_K_S  Read Replies (2) of 78743
 
Hi Paul -

Would this imply that Graham's portfolio turnover rate was 24-36 months?

The only thing that may be a bit different this time is more company's have more cash on their balance sheet. Some company's have even deleveraged their debt by raising more equity (through secondary stock offerings) As a result more companies will have more free cash than normal which could be used to (a) repurchase stock, (b) increase dividends or (c) even pay down debt.

For this recovery cycle, I expect to see more companies announce dividend increases even as the Fed increases rates to more normal levels. This might raise investors earnings expectations (especially if payout ratios don't increase much) and as a result individual company PE's should expand.

Graham's strict sell criteria might extend into a three year holding period (rather than the 2 years stated in the article) as long as the reported company's financial condition remains strong (w/ twice as many assets than debts).

I just did not realize that Graham had a rule to take profits when a 50% gain was reached even though the other value financial criteria was met.

The financial crash experienced in 2008, stock "values" got so out of line with market prices that IMO selling out the entire position once a 50% gain was achieved would have resulted in selling way too early. In some cases leaving another 50% on the table.

I certainly follow Graham when screening and buying "value" opportunities but follow a Warren Buffet style when selling (if the company continues to grow and is still earning money and priced w/ a PE to its peers - continue to hold).

EKS

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