A Quote by Benjamin Graham
Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of good business conditions. The purchasers view the good current earnings as equivalent to 'earning power' and assume that prosperity is equivalent to safety.
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The chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.
In our view, though, investment students need only two well-taught courses-How to Value a Business, and How to Think about Market Prices. Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business who's earnings are virtually certain to be materially higher five, ten and twenty years from now.
My goal is to buy a company at a low multiple to normal earnings power several years out and that the company earns good returns on capital at that level of normal earnings. A holding period of more than one year also works quite well as the factors are persistent in years 2 and 3.
I still believe that for good business analysts a concentrated portfolio is a good strategy combined with a long term horizon. Once again, the secret to success in following the formula strategy is patience, a quality in short supply for both professionals and individual investors alike. I think investors should have a large portion of their assets in equities over time.
We wish to control big business so as to secure among other things good wages for the wage-workers and reasonable prices for the consumers. Wherever in any business the prosperity of the business man is obtained by lowering the wages of his workmen and charging an excessive price to the consumers we wish to interfere and stop such practices. We will not submit to that kind of prosperity any more than we will submit to prosperity obtained by swindling investors or getting unfair advantages over business rivals.
The big picture is: the main thing you should be concerned about in the future are incremental returns on capital going forward. As it turns out, past history of a good return on capital is a good proxy for this but obviously not foolproof. I think this is an area where thoughtful analysis can add value to any simple ranking/screening strategy such as the magic formula. When doing in depth analysis of companies, I care very much about long term earnings power, not necessarily so much about the volatility of that earnings power but about my certainty of "normal" earnings power over time.
It's an advantage for both parties to have the other. It also creates good stability of earnings. Our business mix means we have a diversified earnings stream, which is one of the things why we got through the tough times so successfully.
Accounting consequences do not influence our operating or capital-allocation decisions. When acquisition costs are similar, we much prefer to purchase $2 of earnings that is not reportable by us under standard accounting principles than to purchase $1 of earnings that is reportable.
Even when times were good, I realized that my earning power as a golf professional depended on too many ifs and putts.
Calculate a stock's price/earnings ratio yourself, using Graham's formula of current price divided by average earnings over the past three years.
I only know as much about myself as my mind can work out under its current conditions. And its current conditions are not good.
While women certainly have made great strides toward pay parity in the past 30 years, there is still a gap in earnings between men and women in equivalent professions.
The (photographic) negative is the equivalent of the composers score and the print is the equivalent of the conductors performance.
Churches are more prosperous than at any time within the past several hundred years. But the alarming thing is that our gains are mostly external and our losses wholly internal; and since it is the quality of our religion that is affected by internal conditions, it may be that our supposed gains are but losses spread over a wider field.
So many commercial orgs have software where you can come and modify it but they still control everything. And what's controlled is very clearly what's good for their business, or if they're more progressive, their view of what's good for the Internet.
So many commercial orgs have software where you can come and modify it, but they still control everything. And what's controlled is very clearly what's good for their business, or if they're more progressive, their view of what's good for the Internet.
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