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

To: Graham Osborn who wrote (55404)	6/3/2015 2:30:20 PM
From: E_K_S	2 Recommendations Recommended By Mattyice mopgcw Read Replies (1) \| Respond to of 78702

Re: Graham No. Also, doesn't the very low interest rate environment distort the historical PE. If you take the inverse of the PE (ie E/P) you get the market yield which s/d be a function of the Treasury rate plus inflation. The Treasury rate is now at a historical low level (because of QE). Even if you use the 10-year average of "real" (inflation-adjusted) earnings (ie. the Shiller adjusted figure); E/P is artificially low. I expect the market yield (and the market P/E) to eventually normalize but his could take years rather than months. The key thing w/ the Graham No. valuation model for a specific company, is the earnings and Book Value, both drive the valuation figure especially if the candidate company has little to no LT debt. So where do you get 50 years of historical data? There is a problem also looking in the rear view mirror that far back. EK was one stock I watched in the 70's because of their stable earnings and growing BV. We all know how that one ended. EKS

To: Graham Osborn who wrote (55404)	6/3/2015 5:45:23 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78702

I don't use the Graham number, but I do use book value. For BV I think you just have to choose a conservative multiple based on historic norms for that subindustry. I use historical bv for the company itself, and I almost never compare a company's p/bv to what its peers are doing (i.e. the peer average). Seeking Alpha guys particularly annoy me when they write-up a company and say it's undervalued because other companies in its sector trade at a higher p/bk or a higher p/e. As if by that analogy, that stock with a p/e of 50:1 or 7xbv is cheap and therefore buyable, because a peer company trades at 75 times earnings and 10 times book.