STOCK SELECTION FOR THE DEFENSIVE INVESTOR:
- Adequate Size: To exclude small companies, steer clear of stocks with a total market value of less than 2 billion.
- Strong Financial Condition: The company’s assets should be at least twice its liabilities. * Earnings Stability: Some earnings for the common stock in each of the past ten years.
- Dividend Record: Uninterrupted payments in the last 20 years.
- Earnings Growth: 10-year earnings growth of at least 33% (50%, or even 100% would be a less conservative figure to go by).
- Moderate P/E ratio: Current price is no more than 15 times average earnings over the last 3 years.
- Moderate price-to-book ratio: A price-to-book-value ratio of 1.5 or less (2.5 can be used as a less conservative number). You can use the 22.5 blended multiplier (graham-number) as an initial screener for reasonably-priced stocks.
- Ownership: A company that has institutionally ownership above 60% is over-owned and scarcely undiscovered, avoid.
TIP: Index funds are the defensive investors best bet in today's world. A simple S&P 500 Index Fund can be a great choice for the defensive investor.
STOCK SELECTION FOR THE ENTERPRISING INVESTOR:
- Financial Condition: Current Assets at least 1.5 times current liabilities, debt no more than 110% of net current assets (for industrial companies).
- Earnings Stability: No deficit in the last five years.
- Dividend Record: Some current dividend.
- Earnings Growth: Last years earnings more than those of 1966.
- Price: Less than 120% net tangible assets.
Note: A large goodwill can result from two causes: Its stock can trade for substantially more than its book value, a corporation can acquire other companies for substantially more than the value of their assets.
Let me know what you think about my summary :).
Submitted March 13, 2024 at 09:18PM by Far_Heron_4816 https://ift.tt/81OMpBF
