bobbobwhite

Some Graham and Dodd Type Thoughts on Stocks vs. Bonds

I agree about buying low PEG but add one more thing: I look for the best performing company in its industry along with a low PEG, but maybe not the lowest. Sounds conflicting at first read, I know, but many times just buying the lowest PEG does not get the best performer over time, as PEG is a forward estimate while I have found that consistent, outstanding past performance is actually more important in determining future performance. If both past performance and future PEG projections are good, then it will more than likely be a better choice than choosing it by the lowest PEG alone.


On Aug 13 02:09 PM mbkelly75 wrote:

> Interesting way to look at it and one that I had not thought of (or
> remember doing so, anyway) in over 50 years of investing. Well written
> and clearly explained. A few points that I thought of:
> 1) 1/3 of the portfolio in Bonds works best for me over the years.
> I round it up to 34% and check to see if the portfolio as a whole
> needs re-balancing every 2 weeks.
> 2) Inflation has averaged 3% over the last 80 years so dividends
> going up an average of 5% does well enough at taking care of it and
> turning a profit also, even without re-investing them as they come
> in.
> 3) Focus on dividends that are RAISING their dividends for 5+ years
> - not just paying a dividend. They have a MUCH better return (8.92%
> to 6.2 % average annually) over time and are MUCH more reliable in
> general.
> 4) Investing in ANY stock that is 20% or more discounted from Price/Book
> Ratio, Price/Cash Flow, or a P/E below 10 (I prefer 7 or less P/E)
> can be a good idea. It is a contrarion indicator that works very
> well over time. I prefer to use it as just one of several, but it
> can be used all by itself if you have more money than time.
> 5) Of the 3, P/Cash Flow works best for industry stocks. You can
> simply pick 30 or 40 stocks that are the lowest in each of their
> industries and dwarf returns over the S&P. Holding for 5+ years
> simply allows them to continue gaining value so it works very well
> as a buy-and-hold strategy.
> 6) That growth should be a part of this can be solved easily by using
> a PriceEarningsGrowth Ratio instead of just the PE is much better
> overall. 0.50% or less is a Buy, from there to 0.65% is hold or buy,
> from there to 1% is probably hold and 1% and up indicates that the
> stock is either fully valued or over-valued.