Transfer: Graham September 1976 interview: Select the cheapest stock _ the easiest way to sit idle.

Graham September 1976 interview: Select the cheapest easiest way to stock (2011-01-24 12:55:56) <wbr> <wbr /> by: This article is transferred from Liu-bit blog <wbr> <wbr ./> <wbr> <wbr /> <wbr> <wbr /> <wbr> <wbr /> <wbr> <wbr /> <wbr> <wbr /> from "Medical Economy" September 20, 1976 Special .reported. .All rights reserved. .The "Medical Economy" allows reprinting <wbr> <wbr /> <wbr> <wbr /> switched from the "value and then found: Approaching the investment guru Benjamin Graham," the first 337-347 pages <wbr> <wbr / .> you can hardly find Benjamin Graham more than the stock market for the more knowledgeable, more understanding of the true value of shares the secrets of the people. .He is regarded as their teachers securities analysts. .Not only because he and co-author of the "Security Analysis" has become the Bible of the securities industry, but also because he chose to become a Wall Street stock's performance legendary. .35 years old to become a millionaire, Benjamin Graham, retirement living in California. .In recent years, he is committed to refining his use of nearly 50 years of stock picking, and summarized these methods easy to implement the principles. .Benjamin, now 82, recently with the investment adviser Graham James B. Ray, establish a fund as the basis of these principles. .Benjamin Graham believe that the application of these principles to manage their own investments to have access to 15% or higher returns. .La Jolla waterfront apartment sitting in his study, Benjamin Graham, the "Medical Economy" (Medical Economics) of the West Coast editor ����л��� (Bart Sheridan) investment approach outlined his basic outline. .Senior Assistant Editor Langton McCartney (Laton McCartney) lists the main points of their conversation. .Q: Can you tell us how you come to Graham simplified techniques? .A: Well, the past few years, I have been trying to find out through some simple standard choice undervalued stocks. .My research shows that by this method to find the portfolio in the long term access to twice the performance of the Dow Jones Industrial Average. .50-year study period, but in a shorter period of time, this approach would be more effective. .This makes me very interested, I think that it should be implemented. .Q: Do you use this method you choose growth stocks? .Answer: no. .I think that the so-called growth stock investors or securities analysts in general do not know how much to pay the price of growth stocks and do not know how many shares should be purchased to obtain the desired benefits, but do not know what will change in stock price. .These are fundamental questions. .This is why I think growth stocks can not be applied to obtain a reasonable set of theories, reliable income. .Q: So the company plans to use the traditional profit or market share price method to measure it really good? .A: Those are important in theory, but they decided how much to pay for the price of a stock and when to sell a small area of practical significance. .Is sometimes only able to identify many of the stock price is too high, and sometimes they are undervalued. .My research study indicates that a broadly diversified portfolio, the ability to know in advance the logical time to buy and selling point, but do not bother to measure the impact of the prospect of a particular company or industry fundamentals. .Q: The basic factors that do not consider the way of thinking, will be today, many analysts regarded as heresy. .A: It may be so. .But my research shows that the kind of thinking is useful. .The absolute need to take the first rule is to buy those shares is less than the value of the stock. .Second, we must buy a variety of stocks so that the method can work. .Finally, it must determine a selling point. .Q: A doctor or ordinary investors like me, that could be done these? .A: certainly. .Q: How do I start? .A: The list as a detailed list of all the current price is not higher than in the past 12 months to 7 times the earnings of ordinary shares. .As long as access to "The Wall Street Journal" or other major daily in the stock market's price-earnings ratio can be listed in the table. .Q: Why should be 8 times earnings, rather than say, 9 times or 5 times it? .A: The decision to carve in the given time how much money is one way to buy stocks is to look at bond yields is. .If bond yields higher, you want to buy stocks at low prices, so for a relatively low price-earnings ratio. .If bond yields fall, you would be willing to pay higher prices to buy stocks, so to accept a higher price-earnings ratio. .As a rule of thumb on the stock price, and I choose only those profits - the price ratio (price-earnings ratio is the inverse of) at least is the best corporate bonds (3A level) twice the average income. .Q: For example please? .A: Yes. .As long as bond yields multiplied by 2, then 100 removed. .Recent AAA bond average yield is about 7%. .Multiplied by 2 to get 14%, with 100 except 14, the result is about 7 times. .Therefore, the use of my system build portfolio a stock today for the highest price paid is seven times its earnings. .If a stock's price-earnings ratio more than 7 times, it is not included in the portfolio. .Q: If the AAA bond yields down to, say, 6 times it? .A: Well, the price-earnings ratio will rise to accept. .6 multiplied by 2 equals 12, with 100 to remove, so the highest price-earnings ratio is 8. .However, I personally think that more than 10 times price-earnings ratio ǧ��Ҫ�� stock, regardless of the bond proceeds are reduced to what extent. .Q: Okay. .Well, now according to your formula, can only be purchased at 7 times earnings the stock. .For this condition? .A: Oh, this method provides a better investment portfolio selected basis, but the application of another standard, can do better. .You should choose such a portfolio, which not only meet the price-earnings ratio of stock conditions, and the company's financial position satisfactory. .Q: How can I determine this? .A: You can use a variety of ways to test, but I like to use the following simple rule: a company should have owed it twice. .Easy way to test this is to look at equity to total assets ratio, if the ratio of 50% or more, the company's financial condition to be regarded as sound. .Q: What is the "equity"? .A: The short, it is the company's net worth, when you deduct the liabilities from the assets obtained after the amount. .Q: Do I need an accountant to calculate it for me? .A: do not need. .From the company's annual report, you can easily get the total number of assets and equity, or you can let your broker to provide you with these numbers. .Q: You give me an example of the use of the rule it? .A: For example, a company's equity is $ 30,000,000, $ 50,000,000 total assets, equity to total assets ratio is 60%. .Since the ratio of more than 50%, the company passed the test. .Q: So now the conditions are not met 7 times the price-earnings ratio is lower than it? .A: Yes. .Although not in 1973 and 1974 when the stock market crash as much, but there are many. .Q: Once I completed the selection process to determine the need to buy stocks, how to build my portfolio it? .A: From the statistical point of view, Number of shares to buy more, the greater the chance of profit. .Contains the 30-stock portfolio may be the ideal minimum number of. .If capital is limited, you can "zero stock transactions", the sale of less than 100 shares of stock. .Q: Should I hold these shares how long? .A: First you should set a profit target. .More than 50% of the target cost has been quite good. .Q: Do you mean I should set the target at which to buy a stock on the profits of each are 50%? .A: Yes. .As long as the stock rose 50%, sell it. .Q: What if up to less than 50% of the goal? .A: You must limit your holding period in advance. .My results show that two to three years is the most appropriate. .So I recommend the following rule: the time of purchase counting from the end of the second year has not reached the target price, regardless of high or low current price, treat it discard. .For example, if you bought in September 1976 the stock, you should put it before the end of 1978, throw away. .Q: How should I deal with selling the stock received cash? .Should be reinvested in other stocks to meet the stock selection criteria? .A: Under normal circumstances, yes, but should be adaptable according to the market environment. .If, as the crash of 1974 did, when you find many good company's stock price-earnings ratio is very low, you should take full advantage of this opportunity, you are ready to invest 75% of the funds for the purchase of common stock. .Conversely, when the market price of the whole is too high, you can hardly find qualified stock reinvestment. .At such times, you should be less than 25% of the funds invested in stocks and other investments in U.S. government bonds. .Q: Using your strategy, what kind of benefits can I get it? .A: Obviously, you can not have stocks in each get 50% of the proceeds. .If you are scheduled to hold a stock over the period, you have to sell it, and received the proceeds will be reduced or even losses. .However, in the long run, plus dividends, less commission, you can get an average of 15% or more a year total return on investment. .Overall, more than the amount of bonus commissions. .Q: This is your research based on your 50 years get in return? .A: Yes. .The results for the short period of continuity, say 5 years is also true. .I think a shorter period of validity of this strategy is difficult to prove. .For example, in 1973 and 1974 stock market crash of investors are losing money in the book, but if he insisted on the use of this strategy, he in 1975 and 1976 to recover the entire 5-year period, .still be able to get an average return of 15%. .If you reproduce the words of that case, investors should be prepared to ride out the stock prices of the period. .Q: The Dow is now around 1,000 points, many stocks reached a five-year high price, if possible, like the late 60's early 70's after the stock price is too high the kind of crash? .A: I do not believe me or any other person in the prophecy will happen in the market that has any special power, but I am sure, if the price level was dangerously high, a large market correction of the probability indeed. .In my tests conducted, there are many overpriced period, the stock price less attractive, which proved a warning, the market price of the whole is indeed too high. .Q: Can you use your method on how to summarize the main points where it? .A: The investors in the long run, insist on using these simple criteria need to be patient, this will be beneficial to statistical probability. .<h2 STYLE="TexT-inDenT: 0cm; MArGin-LeFT: 0cm"> cheap shares of stock to satisfy the following sample of Benjamin Graham recommended in the article selection criteria for stocks - 7 times earnings and equity to assets .rate above 50%. .All of these shares are listed on the New York Stock Exchange (see Table 13-1). .Table 13-1 samples of the company shares the name of cheap shareholders (in millions) Total assets (USD million) share capital - assets ratio (%) EST (16 August 1976) Current Price (August 16, 1976) Sugar .Industry Associates 9212077336.875 Amon Puck - Pittsburgh 506 577 710 Armstrong Star Corporation 23,044,152,644.25 company Blue Bell 16,430,254,539.875 Federal Federal Paper Company 8112465425.625 Gordon Jewelry Company 15,329,153,537.75 8,614,755,510.75 8,011,769,413.75 Harsco Corporation Grand Te Weier 20,635,858,622.875 He wear .Houghton Mi Fulin Luo Industries Corporation 548,762,612 12,619,066,616.125 Hughes - Hatchell Company 26,475,467 appointment, the company 406,562,518.25 Georgeson (Hurley M) 7812264537 Rennes, Brittany Lancaster Company Company Company 31,625,068 Mike 7,613,755,611.75 Lisilifei .Michigan Tube Company 486 871 616 Cod Murray Ohio Company Company 426,565,620.50 477,860,720.25 Norris Industries Industries 7,812,960,611.75 11,919,661,637.75 Ou Make Reeves Brothers Textile Corporation 8,214,856,516.75 7,310,868,630 Ruijie Er Road, silk clothing company 486,475,610.625 Sparton Corporation 23,356,668.25 Wua to the company .578766621 Wallace - Murray Western Publishing Company 10,520,950,718.375 10,316,363,616.375 Sweeney footwear manufacturing company 234 057 723 Berg 292181617 <wbr> 17 <wbr> Micrel Inc..