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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (37339)	4/11/2010 11:23:42 AM
From: Walter Bagehot	Read Replies (1) \| Respond to of 78715

Sounds interesting - is it something like Joel Greenblatt's magic formula investing? I have not read the book as I was put off by the marketing/get-rich-quick title, but I since understand that Greenblatt is not particularly keen on the title of the book or its perception in hindsight, so am prepared to give it a chance.

To: E_K_S who wrote (37339)	4/11/2010 1:20:31 PM
From: Dan Meleney	Respond to of 78715

re:AAA bond rating in value calculation...you might need to adjust for potential grade inflation of ratings over the years...and perhaps we'll see some deflation. Certainly GE was riskier 2 years ago as AAA then they are now at their lower rating with their increased cash horde.

To: E_K_S who wrote (37339)	4/11/2010 2:21:05 PM
From: Paul Senior	Read Replies (3) \| Respond to of 78715

The author has not summarized the Ben Graham interview right. I just have to go through my little library to find my lost journal issue, the one with that original article. It's a significant reference for me since it has formed the basis of most of my investing in the past many years. It's important because in the article Dr. Graham essentially dismisses the relevance of security analysis (as practiced by him post depression era) for the individual investor. In essence, following Dr. Graham's latest research at that time of the article, it is less of a reliance on individual security analysis and more emphasis on sticking to "one or more" criteria with a sufficient number of diverse stocks. This to concentrate (my words) on portfolio results rather than individual securities themselves. The criteria Dr. Graham suggested - but he specifically did not say these exclusively were the only ones - were, as I interpret the interview, p/e at 7 or below and/or dividend yield (7%), and/or p/bv under 1.2. Also, the time holding he suggested could be 2 or 3 years (not just the two years which he suggested earlier for net-net situations).

To: E_K_S who wrote (37339)	4/11/2010 8:18:52 PM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 78715

The problem with Graham is that he has proposed a lot of different formulas. In a single edition of "Intelligent Investor" he has at least three different criteria sets for stock purchasing. And it is even worse if one goes across multiple editions of "Intelligent Investor" and "Security Analysis". Now we are supposed to believe that in 1976 he had an Eureka moment and decided that one year PE < 10 + PE < inverted 2x AAA bond yield and D/E < 1 is enough. I'd say "no way" although I am sure Graham qualified the above with his customary: buy stocks only in established companies with a history of positive earnings and so on. I am not sure even with additional caveat that these criteria are good. IMHO, in normal market (March 2009 does not count :))), there will be very few companies satisfying Graham's criteria. Furthermore, most of them will be on the verge of earnings decline that market would assume to be terminal. But, please suggest a list of companies currently satisfying the criteria and let's look at them. :) P.S. Although <1 D/E already pretty much precludes financials, let's remember that Graham always excluded them into a separate category too. So please no banks, BDCs, insurance, MLPs, companies with finance subsidiaries, REITs and other exotics. :)