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

To: E_K_S who wrote (48490)	6/28/2012 11:22:28 PM
From: Sergio H	Respond to of 78748

Hi EKS. Let's look at your post mathematically. If you set those parameters, then a program can pick it out. Things change and in this age of computerised trading isn't it more worthwhile looking for paradign shifts or disruptive technologies to find true value?

To: E_K_S who wrote (48490)	6/29/2012 12:12:55 AM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 78748

A company would have to meet seven of the following ten criteria To even have a chance of satisfying seven criteria, the company has to be profitable. If company is profitable, the chance of it satisfying criteria 4 and 5 is negligible. There are some Chinese (and some Japanese - yes, Clownbuck?) companies that are profitable and satisfy criteria 4 and 5. In USA, you'd be lucky if you found couple microcaps that satisfy this. So we are down to eight criteria with seven to be satisfied. Now we go to criterion 10 - there are very few companies that satisfy this in 2008/2009 frame, so we are left with seven criteria, all of which have to be satisfied. To satisfy criterion 3, company has to pay dividend, so you have to look only at dividend paying companies with yields greater than 2/3 of AAA bond... On the positive side, bonds yield almost nothing, so criterion 1 is easy and criterion 3 is somewhat easy for divvie paying companies. Criterion 2 is somewhat easy too, companies are still at low PEs. Criterion 6 is easy, since most companies are delevered. Criterion 7 is IMHO worthless - I never understood fascination with current ratio - it makes sense only for companies close to bankruptcy, not for healthy companies. Healthy company can always get cash, so current ratio is pretty much meaningless for anything that is not Kmart... Criterion 8 is easy for unlevered companies. Criterion 9 is passable. So overall, you may be able to find some companies that satisfy criteria 1,2,3,6,7,8,9. Might be able to swap 10 for 3 or 7 for a few cos, though not many.

To: E_K_S who wrote (48490)	6/29/2012 2:13:44 AM
From: Paul Senior	1 Recommendation Read Replies (1) \| Respond to of 78748

"A company would have to meet seven of the following ten criteria (as laid out in Security Analysis) before Graham would consider it a cheap stock:)" This may be valid today. In his last years though, Dr. Graham, as regards building a portfolio, did not advocate "elaborate techniques of security analysis in order to find superior value opportunities". In answering the question, "Can you indicate concretely how an individual investor should create and maintain his common stock portfolio?", Dr. Graham gave two examples of his suggested approach: The first was selecting stocks "at less than their working-capital value, or net current asset value". This technique he said, "appears severely limited in its application". The other approach "consists of buying groups of stocks at less then their current or intrinsic value as indicated by one or more simple criteria. The criterion I prefer is seven times the reported earnings for the past 12 months. You can use others - such as a current dividend return above seven per cent or book value more than 120 per cent of price, etc... I have every confidence in the...merit of this general method based on (a) sound logic, (b) simplicity of application and (c) an excellent supporting record. At bottom it is a technique by which true investors can exploit the recurrent excessive optimism and excessive apprehension of the speculative public". From my treasured Sept/Oct 1976 issue of Financial Analysts Journal, "A conversation with Benjamin Graham"