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

To: Jurgis Bekepuris who wrote (48492)	7/3/2012 2:29:13 PM
From: paulelgin	2 Recommendations Read Replies (2) \| Respond to of 78748

The whole point of Graham's exercise is that stocks should be purchased when they are screaming values - not "relative values" as we have been conditioned since 1995. We haven't seen as many Graham-type values in so long because we haven't had a complete washout a la 1982, 1974, or 1968-1969. Now, these rules are set aside for "Enterprising Investors." Other investors (more conservative, or inactive) Graham feels can buy fairly-valued stocks and hold on to them (his last edition of The Intelligent Investor came just before the 1974 washout, and many stocks were trading at between 25x-50x earnings during the Nifty Fifty craze). Just don't pay more than 16x trailing earnings for the past seven years for a good, dividend-paying stock with little debt. JNJ, MMM, MSFT are a few that can be had right now for decent valuations, pay dividends, and have good balance sheets. If you take a look at anything Shiller, Hussman, Richard Russell, Charles Allmon, or Jim Rogers have done, their work will tell you that we don't have any real Graham-type bargains in the market right now. Sure, you can pick up a few - but, to be a true Graham operation, you need to own over a hundred stocks meeting his criteria. Graham-Newman Corp. followed these guidelines very profitably (of course, Graham also had a huge position in GEICO - a 1/4 stake in the company - that he purchased in the forties, I believe). Graham wrote that a well-diversified portfolio need not contain a hundred stocks, as his did. Between ten and thirty equities covering several fields of business should provide adequate diversification, in his view. However, the fact that so few Graham bargains are available in today's market should be taken as an indicator that we should batten down the hatches and wait for panic sellers to turn richly-valued stocks into bargains for us to snap up. Paul Elgin