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  • Book Review: The Bogleheads' Guide To Investing [View article]
    Just more evidence that when we study the methods of most successful investors, we see similar principles expressed and applied in different ways.

    Buffett himself once said of laziness:
    "Lethargy, bordering on sloth should remain the cornerstone of an investment style."

    And the first strategy recommended by Buffett's mentor - Benjamin Graham - for casual investors, was to invest in Index stocks; today's equivalent of which would be an Index fund.
    Apr 27, 2015. 05:17 PM | Likes Like |Link to Comment
  • Book Review: The Bogleheads' Guide To Investing [View article]
    Nicely said, Hardog!
    Apr 27, 2015. 05:10 PM | Likes Like |Link to Comment
  • Understanding The Benjamin Graham Formula Correctly [View article]
    Better left unsaid, Hardog :-)
    Apr 27, 2015. 04:03 PM | Likes Like |Link to Comment
  • Understanding The Benjamin Graham Formula Correctly [View article]
    Thank you for your comment, Bazz White.
    Many fantastic - and even occasionally absurd - investing strategies become popular over short periods.

    As Buffett says:
    "Only when the tide goes out do you discover who's been swimming naked."

    But before a strategy is applied to significant investments, it needs to be proven to fare well across decades of market cycles.
    Apr 27, 2015. 07:36 AM | Likes Like |Link to Comment
  • Understanding The Benjamin Graham Formula Correctly [View article]
    Thank you for your comment, valuinvstr99.

    From Chapter 14 of The Intelligent Investor - Stock Selection for the Defensive Investor:
    "6. Current price should not be more than 15 times average earnings of the past three years."

    The Graham Number on Serenity is thus calculated using the average EPS of the last three years, as Graham intended.
    But this is something else that is rarely followed today.

    For better or for worse, Serenity tries to follow Graham's principles to the letter (apart from adjustments for inflation).
    Apr 27, 2015. 07:32 AM | Likes Like |Link to Comment
  • Understanding The Benjamin Graham Formula Correctly [View article]
    Thank you for your comment, Ramparts.

    Unlike the other stocks, you can see that the "last updated" field for GNI shows "2 weeks".

    Also, if you look at the full analysis for Great Northern Iron Ore (GNI) on Serenity, you can see a detailed description of the Termination of the Trust and how the Graham price calculations have been adjusted accordingly.

    The next full refresh will clear out the GNI record altogether from Serenity's database.
    Apr 27, 2015. 07:30 AM | Likes Like |Link to Comment
  • Understanding The Benjamin Graham Formula Correctly [View article]
    Thank you for your comment, Speetzman.
    And apologies for the delayed reply!

    Again, from Warren Buffett's article - "The Superinvestors of Graham-and-Doddsville":

    "In this group of successful investors that I want to consider, there has been a common intellectual patriarch, Ben Graham. But the children who left the house of this intellectual patriarch have called their “flips” in very different ways."

    "I should add that in the records we’ve looked at so far, throughout this whole period there was practically no duplication in these portfolios. These are men who select securities based on discrepancies between price and value, but they make their selections very differently. "

    Again, Graham gave an elaborate framework which consisted of several different strategies for different types of investors. Schloss exclusively focussed on the NCAV strategy, whereas almost all of Buffett's transactions are "special situations".

    In fact, when we study the methods of most successful investors, we see similar principles expressed and applied in different ways.

    Graham says "to distill the secret of sound investment into three words, we venture the motto - Margin of Safety."
    Buffett says "Rule No.1: Never lose money. Rule No.2: Never forget rule No.1."
    Seth Klarman says "Loss avoidance must be the cornerstone of your investment philosophy."
    And both Soros and Buffett refute the Efficient Market Hypothesis (EMH) in their own ways.

    Article: True Value Investing Includes Quality And Growth (http://seekingalpha.co...) has more details.

    So the various schools of investment thought are not necessarily mutually exclusive; and yes, one can assimilate from all of them. Graham's framework is just very comprehensive, and comes very highly recommended.

    Possibly his experience as a part time teacher - and help from students such as David Dodd - put Graham in a unique position; a real-world fund manager who could develop, refine and document an encyclopedic investment framework.

    In the preface to The Intelligent Investor, you can see Buffett explain how he never came across anyone else with a "mind of similar scope" as Graham.
    In the "Legacy of Benjamin Graham" video, you can see Buffett explain how Graham was not motivated by money, and was only interested in building a framework with which ordinary investors could achieve results similar to his own (Grahams's).

    Sorry about the long reply, but it was an interesting question.
    Apr 27, 2015. 07:10 AM | 1 Like Like |Link to Comment
  • True Value Investing Includes Quality And Growth [View article]
    All the article says is that betting heavily on a few promising stocks "goes against Graham's definition of sound investment", Jae Jun.

    If you don't want to follow Graham's definition, that's your choice.

    Also, if the principal amount is not significant, then it makes sense to focus one's research on just a few stocks. That would not even be a violation of Graham's principles since such an investment does not constitute "betting heavily".
    Apr 27, 2015. 07:00 AM | Likes Like |Link to Comment
  • Great Companies You Should Not Invest In, Part 1: The Walt Disney Company [View article]
    Visa Inc (V) - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 2,585.80%
    Current Assets ÷ [2 x Current Liabilities]: 79.60%
    Net Current Assets ÷ Long Term Debt: 100.00%
    Earnings Stability (100% ⇒ 10 Years): 70.00%
    Dividend Record (100% ⇒ 20 Years): 40.00%
    Earnings Growth (100% ⇒ 30% Growth): 0.00%
    Graham Number ÷ Previous Close: 118.65%

    You can assess all 5000+ NYSE and NASDAQ stocks against Graham's 17 rules on Serenity, cn_habs.
    Apr 26, 2015. 05:00 PM | 1 Like Like |Link to Comment
  • Understanding The Benjamin Graham Formula Correctly [View article]
    Thank you for your comment, dunnhaupt.

    As far as the academic world goes, given below are some relevant notes from Warren Buffett's article - "The Superinvestors of Graham-and-Doddsville".

    "If it doesn’t make any difference whether all of a business is being bought on a Monday or a Friday, I am baffled why academicians invest extensive time and effort to see whether it makes a difference when buying small pieces of those same businesses."

    "I always find it extraordinary that so many studies are made of price and volume behavior, the stuff of chartists........ It isn’t necessarily because such studies have any utility; it’s simply that the data are there and academicians have worked hard to learn the mathematical skills needed to manipulate them."

    Buffett concludes the article writing:

    "The academic world, if anything, has actually backed away from the teaching of value investing over the last 30 years. It’s likely to continue that way. Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace, and those who read their Graham & Dodd will continue to prosper."

    Graham wasn't an academic. He was a fund manager who taught in his spare time.
    Apr 26, 2015. 10:44 AM | 3 Likes Like |Link to Comment
  • Understanding The Benjamin Graham Formula Correctly [View article]
    The link seems to work fine, mkemac.
    But in any case, here it is again - http://seekingalpha.co...
    Apr 26, 2015. 09:15 AM | Likes Like |Link to Comment
  • ModernGraham Quarterly Valuation Of Citigroup Inc. [View article]
    The ModernGraham website cites the following formula as one of the Graham methods applied:

    Intrinsic Value = EPS x (8.5 + 2xGrowth)

    Benjamin Graham actually gave several warnings about this formula and only mentioned it briefly to demonstrate why oversimplified growth-based valuations are unreliable. But due to an omission in recent editions of The Intelligent Investor, this formula is often mistakenly used today instead of Graham's actual (and more thorough) methods.

    Article: Analysts Continue To Use Wrong Benjamin Graham Formula (http://seekingalpha.co...) discusses the issue in detail.

    Another ModernGraham rule mentioned in the above article is:
    "Adequate Size of Enterprise - market capitalization of at least $2 billion"

    Graham actually recommended "Not less than $100 million of annual sales" for this rule. Checking for Market Capitalization instead of Sales will - all else being equal - rate overvalued stocks higher than undervalued ones.

    Graham's first recommended strategy - for casual investors - was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 rules for finding them.
    For advanced investors, Graham described various "special situations".

    The first requires almost no analysis, and is easily accomplished today with a good S&P500 Index fund.
    The last requires more than the average level of experience, intuition and talent. Such stocks are not amenable to impartial quantitative analysis, and require a case-specific approach.

    But Defensive, Enterprising and NCAV stocks can be reliably detected by today's data-mining software, and offer a great avenue for detailed objective analysis and profitable investment.

    For example, given below are the actual Graham ratings for Citigroup Inc (C), with no adjustments other than those for inflation.

    Defensive Graham investment requires that all ratings be 100% or more.
    Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Citigroup Inc - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 14,010.80%
    Current Assets ÷ [2 x Current Liabilities]: 0.92%
    Net Current Assets ÷ Long Term Debt: 0.00%
    Earnings Stability (100% ⇒ 10 Years): 50.00%
    Dividend Record (100% ⇒ 20 Years): 25.00%
    Earnings Growth (100% ⇒ 30% Growth): 7.16%
    Graham Number ÷ Previous Close: 3.13%

    Not all stocks failing Graham's rules are necessarily bad investments. They may fall under "special situations". Graham's rules are also extremely selective. Graham designed and backtested his framework for over 50 years, to deliver the best possible long-term results. Even when stocks don't clear them, Graham's rules give a clear quantifiable measure of a stock's margin of safety.

    Thank you.
    Apr 24, 2015. 05:43 PM | 2 Likes Like |Link to Comment
  • A List Of Classic Value Stocks Part I: Net-Nets [View article]
    Again, not disagreeing with you, Ruerd Heeg.

    The market does generally pay too much of a premium for good news.
    One probably will fare better with cheap, unpopular stocks.

    The only point we're differing on is: cheap+decent vs just plain cheap.

    You're referring to pure bargain hunting.
    Graham and Serenity advocate true value investing: quality+quantity at a fair price.

    For a more detailed explanation, please see the article - True Value Investing Includes Quality And Growth (http://seekingalpha.co...)
    Apr 24, 2015. 12:46 PM | Likes Like |Link to Comment
  • Great Companies You Should Not Invest In, Part 1: The Walt Disney Company [View article]
    Benjamin Graham - once known as The Dean of Wall Street - was a scholar and financial analyst who mentored legendary investors such as Warren Buffett, William J. Ruane, Irving Kahn and Walter J. Schloss.

    Warren Buffett once wrote a detailed article explaining how Graham's record of creating exceptional investors (such as Buffett himself) is unquestionable, and how Graham's principles are everlasting. The article is called "The Superinvestors of Graham-and-Doddsville".

    Buffett describes Graham's book - The Intelligent Investor - as "by far the best book about investing ever written" (in its preface).

    Graham's first recommended strategy - for casual investors - was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them.
    For advanced investors, Graham described various "special situations".

    The first requires almost no analysis, and is easily accomplished today with a good S&P500 Index fund.
    The last requires more than the average level of ability and experience. Such stocks are also not amenable to impartial algorithmic analysis, and require a case-specific approach.

    But Defensive, Enterprising and NCAV stocks can be reliably detected by today's data-mining software, and offer a great avenue for accurate automated analysis and profitable investment.

    For example, given below are the actual Graham ratings for Walt Disney Co (DIS), with no adjustments other than those for inflation.

    Defensive Graham investment requires that all ratings be 100% or more.
    Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Walt Disney Co - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 9,979.00%
    Current Assets ÷ [2 x Current Liabilities]: 57.09%
    Net Current Assets ÷ Long Term Debt: 14.86%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 100.00%
    Earnings Growth (100% ⇒ 30% Growth): 160.32%
    Graham Number ÷ Previous Close: 42.66%

    Not all stocks failing Graham's rules are necessarily bad investments. They may fall under "special situations". Graham's rules are also extremely selective. Graham designed and backtested his framework for over 50 years, to deliver the best possible long-term results. Even when stocks don't clear them, Graham's rules give a clear quantifiable measure of a stock's margin of safety.

    Thank you.
    Apr 24, 2015. 12:36 PM | Likes Like |Link to Comment
  • Got Alpha. Now What? A New Way To Kill Spiders (SPY) [View article]
    Finding the next Warren Buffett is not necessarily the only option for someone who wants more control and discretion than an index fund.

    Benjamin Graham - also known as The Dean of Wall Street and The Father of Value Investing - was a scholar and financial analyst who mentored legendary investors such as Warren Buffett, William J. Ruane, Irving Kahn and Walter J. Schloss.

    Warren Buffett once wrote a detailed article explaining how Graham's record of creating exceptional investors (such as Buffett himself) is unquestionable, and how Graham's principles are everlasting. The article is called "The Superinvestors of Graham-and-Doddsville".

    Buffett describes Graham's book - The Intelligent Investor - as "by far the best book about investing ever written" (in its preface).

    Graham's first recommended strategy - for casual investors - was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them.
    For advanced investors, Graham described various "special situations".

    The first requires almost no analysis, and is easily accomplished today with a good S&P500 Index fund.
    The last requires more than the average level of ability and experience. Such stocks are not amenable to impartial algorithmic analysis, and require a case-specific approach.

    But Defensive, Enterprising and NCAV stocks can be reliably detected by today's data-mining software, and offer a great avenue for accurate automated analysis and profitable investment.

    In fact, Defensive, Enterprising and NCAV stocks would probably make for great motifs.
    Apr 24, 2015. 12:16 PM | 2 Likes Like |Link to Comment
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