<beliavsky[at]aol.com> wrote
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Why the focus on small cap?

On Dec 29, 10:16*am, beliav...[at]aol.com wrote:

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That is the major problem with the BG "method". (i.e. It's very
difficult to estimate the intrinsic value of a stock.)

In addition to looking at the financial aspects of a company,
investors need to look at the product line and production methods to
get an idea of future manufacturing costs and market growth.

--
Ron

On Dec 26, 3:24 pm, Nino Samac <nino.sa...[at]st.t-com.hr> wrote:
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I don't remember reading this in his books "Intellgent Investor" and
"Security Analysis".

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Since the stock market as a whole outperforms cash over most long time
periods, I don't agree. Owning a basket of "average" stocks has been
good enough.

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If the stock you bought at 40% of "intrinsic value" (quotes added
because intrinsic value is subjective) now trades at at intrinsic
value, but there are different stocks now trading far below intrinsic
value, why not sell the original stock to buy an undervalued stock, if
the costs of taxes, brokerage commissions, and taxes are not too high?

- quote -

You write as if the main problem with being a value investor is having
enough discipline, but the intellectual difficulty of finding
undervalued stocks should not be underestimated. In 2007, small cap
value drastically underperformed large cap growth, as shown by the
relative performance of the Russell 2000 value and Russell 1000 growth
indices.

Sorry, my newsreader is acting wierd and messed up the quoting on my
last post, here it is with proper quoting (I hope...):

Ron Peterson wrote:
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Tangible book value, with the conditions given, may be a perfectly valid
measure of intrinsic value. But Graham's definition is much more loose,
and he doesn't give a specific calculation for it. Judgement is
required to find intrinsic value according to Graham. The definition of
intrinsic value given in the Fifth Edition of _Security Analysis_ is:

"_the value which is justified by assets, earnings, dividends, definite
prospects, and the factor of management._"

I'm not sure how helpful that will be to the OP...

Ron Peterson wrote:
On Dec 26, 5:50 am, "BGFan" <nos...[at]nospam.com> wrote:
How would I calculate if it's X% of intrinsic value?


The intrinsic value of a stock should be its tangible book value as
long as the company is a going concern and hasn't manipulated its
accounting.

Tangible book value, with the conditions given, may be a perfectly valid
measure of intrinsic value. But Graham's definition is much more loose,
and he doesn't give a specific calculation for it. Judgement is
required to find intrinsic value according to Graham. The definition of
intrinsic value given in the Fifth Edition of _Security Analysis_ is:

"_the value which is justified by assets, earnings, dividends, definite
prospects, and the factor of management._"

I'm not sure how helpful that will be to the OP...

-Will

william dot trice at ngc dot com

On Dec 26, 5:50*am, "BGFan" <nos...[at]nospam.com> wrote:

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The intrinsic value of a stock should be its tangible book value as
long as the company is a going concern and hasn't manipulated its
accounting.

A company is a going concern if its return on investment matches or
beats the average of other companies.

In my portfolio, I can't find any company that I shouldn't sell
according to the BG recommendations. TNP would be my best stock
according to BG standards selling at a P/B of 1.29 and P/E of 6.75
(per Yahoo).

To get a balanced portfolio the BG standards need to be relaxed, so I
will buy at P/B ratios less than 2 and hold up to a P/B of 3.00 (I
have a couple of exceptions).

I can't follow a pure BG strategy because I like tech stocks too much.

--
Ron

"Nino Samac" <nino.samac[at]st.t-com.hr> wrote
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If indeed there are no stocks that meet Graham criteria, it
seems to me that the investor should strongly consider
buying significantly into index funds with adequate
diversity. Historically speaking, leaving one's money out of
stocks and instead in, say, a bank account has not paid well
when we're talking about "decades."

For all 20-year periods from 1929-2005, the annualized
return averages 11.4% with a standard deviation of 3.3%. See
my favorite tool for persuading folks that investing in
stocks is strictly for those with a long time horizon,
http://moneychimp.com/articles/rando...me_horizon.htm .

Perhaps the matter is moot, though, since I think that even
a strict reading and application of Graham criteria to the
past will still yield many opportunities within all 20 year
periods. (I think from general reading this has been duly
studied, and from these studies one could argue there is
much to recommend in Graham's approach.) Maybe the bigger
question is, when one sees what appears to be a Graham-ian
opportunity in Stock X, what fraction of one's portfolio
should the investor, especially the new investor, let Stock
X be? Graham certainly insisted on diversification.

I suppose that, again, studies have indicated that the
Graham-ian opportunities over 20 year periods have always
been sufficiently diverse.

Maybe the most important lesson to take is that one need not
strictly apply Graham-ian criteria to be an effective
investor. His are guidelines. Insight into just how mutable
his guidelines are over time is provided in modern editions
of Graham with well-chosen recent examples by Jason Zweig
accompanying the original Graham text.

On Tue, 25 Dec 2007 06:03:16 -0600, "BGFan" <nospam[at]nospam.com> wrote:

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Benjamin Graham's says you should buy stock to hold it *forever*.
Buying 20% lower and selling 20% higher than you think it's worth is
not even considered investing. You valuate stocks and buy those that
are grossly undervalued, such as buying a dollar bill for forty cents.
There are times when markets offer no such stocks, and it may last for
decades, but you should wait. When they are available (and you should
choose only companies that meet Graham's criteria), you buy and buy
big. And then you hold. Don't look at the market and don't sell unless
you have a reason to, and reason is not the market price of your stock
that's gone even much lower (in fact if that's the case you should buy
even more) but it is the trouble in a company itself, making it a
company that fails to meet Graham's conditions and is likely to go
down. You don't even look at the market, except from time to time to
get an overall picture. There is a time to sell sometimes, and that is
if your own stock got ridiculously high, and you might want to buy
something else. In all other cases, you hold.
Anyway, not everybody is able to listen to Graham's advice, and you
should look at your personality for patience, strength and
determination. If you lack any of those, you may find some other
investing strategy suits you better.

- quote -

" ... in [Graham's 1976 article] "The Simplest Way to Select
Bargain Stocks," which was republished in the book _The
Rediscovered Benjamin Graham_ (ISBN 0471244724) ...[Graham]
suggested selling after a price increase of 50% or after two
calendar years, whichever came first."

See http://www.ndir.com/SI/articles/0405.shtml for this and
more commentary on the subject. Also, google for {"The
Simplest Way to Select Bargain Stocks"}, and some good
studies of the approach come up.

If nothing else, this rough criteria forced me to consider
when a stock I own is wildly overpriced. Tending towards buy
and hold, I do not usually sell. But if I have been holding
(and so watching) a stock for a couple of years, and it
shoots up beyond valuation reason and without any obvious
reason, and stays up a while still with no good reason, I am
inclined to follow Graham above.

(Ron, sorry to piggyback on your post. The original post did
not come up on my newsreader.)

On Dec 25, 6:03*am, "BGFan" <nos...[at]nospam.com> wrote:
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One of the advantages of stock or mutual fund newsletters is that tell
you what to buy and when to sell. And their performance is measured
based on those recommendations. Also Hurlbert publishes a newsletter
that ranks newsletters.

Frank

"Ron Peterson" <ron[at]shell.core.com> wrote in message
news:b3f7128c-0743-4a37-a69f-64b92bc33eca[at]j20g2000hsi.googlegroups.com...
- quote -

He has formulas for figuring out whether a stock is low
- i.e. P/E, EPS, Book value etc. However, I couldn't find
anything to calculate whether it's X% of intrinsic value.
How would I calculate if it's X% of intrinsic value?

- quote -

On Tue, 25 Dec 2007 06:03:16 -0600, "BGFan" <nospam[at]nospam.com> wrote:

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When I was reading Graham, and others, fairly extensively, I found a
paucity of information concerning when to sell.

And over the years I've heard all kinds of recommendations, all of which
make sense in their context.

I think you have to decide on "sell rules" in the context of your overall
investment strategy.

For example, you might do set up a strategy such as:
1. I will hold a total of ten stocks
2. I will select them using "Graham analysis".

The time to sell a stock would be when you have a candidate that your
analysis predicts will do better than any of your holdings.

Or, you might decide on a strategy that invests in several index funds,
and/or bonds or bond funds, with some coherent asset allocation.

The time to sell will be when your actual allocation gets significantly
different from your target, and you are rebalancing.

If you are a "momentum player" (definitely NOT BG's technique!), you might
adopt rules that include, selling when you have sustained a certain loss
below your buy point (e.g. 8%) and maybe selling 1/2 when your stock goes
up a certain amount.

etc.
--ron

On Dec 25, 6:03*am, "BGFan" <nos...[at]nospam.com> wrote:
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There isn't any particular formula. The general idea is to buy low and
sell high. Specifically, buy lower than 80% of intrinsic value and
sell at 120% of intrinsic value.

In today's inflated market, you're not likely to find any stocks
selling low enough to buy, so you will have to modify your buying
criteria and sell when the stock is 50% above that criteria.

--
Ron

Hi, I am reading this book currently. All through
BG talks only about how to select stocks for buying.
But couldn't find much info about what's the right time
to sell. Does any of his other books cover this info?