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Re: Benjamin Graham

PostPosted: Mon Aug 05, 2013 8:19 pm
by winston
An Exit Strategy from the Father of Value Investing By Dr. Steve Sjuggerud

"My favorite holding period is forever," investing legend Warren Buffett likes to say.

Hey, that's my favorite holding period, too… It's great when you can buy the right investment at the right price, and it just keeps on delivering. Buffett has found these businesses better than anyone.

But most stocks aren't something you can hold forever. How do you decide when to sell?

Buffett's hero and mentor, Ben Graham, came up with an interesting strategy for this…

Graham is known as the "father of value investing." He defined our ideas of how and when to buy stocks "cheap." Buffett and other successful investors have taken Graham's ideas and built on them, making billions of dollars.

Graham's ideas about "what stocks to buy" get all the attention. But what most people don't realize is, Graham also had interesting ideas about when to sell...

In their recent (and very good) book, Quantitative Value, Wesley Gray and Tobias Carlisle quote a 1976 interview with Graham…

What's needed is, first a definite rule for purchasing [so] you're acquiring stocks for less than they're worth. Second, you have to operate with a large enough number of stocks to make the approach effective. And finally, you need a very definite guideline for selling.

To meet his three criteria above, Graham suggested:

• Buy stocks with a price-to-earnings ratio of below 10 and a debt-to-equity ratio below 50.
• Hold a minimum of 30 stocks.
• Either sell once you're up 50% or sell in two years, whichever happens first.

In Quantitative Value, the authors showed how well Graham's strategy would have worked from 1976 to present...

The compound annual rate of return would have been 17.8% annually – an incredible return. It blows away the stock market in general, which returned 11% a year.

The authors go in-depth about why the strategy works in the book. In short, owning a basket of cheap stocks allows you to make money as they get more expensive. And by following an exit strategy, you're consistently rolling into the cheapest stocks available.

Graham is the father of value investing. Everyone talks about his ideas for when to buy. Nobody talks about his ideas for when to sell… which were apparently just as good, based on the track record.

A great trade includes a smart buy and a smart sell. Graham clearly thought about both.

What's your exit strategy? Graham says, "You need a very definitive guide for selling."

If you don't have one, you ought to figure that out… and soon!


Source: Daily Wealth

Re: Benjamin Graham

PostPosted: Sat Mar 08, 2014 11:45 am
by winston
Graham says you're basically wasting your time trying to buy low in a bear market and sell high in a bull market.

He argues that a stock is a good buy if it's undervalued and to hell with what the rest of the market is doing.

''The average investor cannot deal successfully with price movements by endeavouring to forecast them,'' Graham writes

Re: Benjamin Graham

PostPosted: Sat Mar 08, 2014 11:46 am
by winston
Incidentally, Graham says you should resign yourself to ''the probability'' that most shares will rise 50 per cent or more from their low point but decline 33 per cent or more from their high point ''at various periods in the next five years''.

Re: Benjamin Graham

PostPosted: Thu Sep 18, 2014 6:32 pm
by winston
"Most businesses change in character and quality over the years, sometimes for the better, perhaps more often for the worse.

The investor need not watch his companies' performance like a hawk; but he should give it a good, hard look from time to time."


- Benjamin Graham

Re: Benjamin Graham

PostPosted: Wed Oct 22, 2014 7:42 pm
by winston
"The individual investor should act consistently as an investor and not as a speculator."

- Ben Graham

Re: Benjamin Graham

PostPosted: Wed Feb 04, 2015 6:07 pm
by winston
"You can get in way more trouble with a good idea than a bad idea, because you forget that the good idea has limits."

- Ben Graham

Re: Benjamin Graham

PostPosted: Thu Jun 18, 2015 6:47 pm
by winston
"The individual investor should act consistently as an investor and not as a speculator."

- Ben Graham

Re: Benjamin Graham

PostPosted: Tue Aug 18, 2015 6:06 pm
by winston
“The individual investor should act consistently as an investor and not as a speculator.”

– Ben Graham

Re: Benjamin Graham

PostPosted: Wed Feb 08, 2017 7:37 pm
by winston
"You can get in way more trouble with a good idea than a bad idea, because you forget that the good idea has limits."

- Ben Graham

Re: Benjamin Graham

PostPosted: Wed Jan 08, 2020 10:23 pm
by winston
Eternity and Investing

by Vishal Khandelwal

The Heilbrunn Center for Graham and Dodd Investing created a wonderful video in 2013 titled 'Legacy of Ben Graham,' which contains bytes from some of his students on how Graham's teachings changed their lives.

Marshall Weinberg, one of the students from Graham's class said that the biggest lesson he drew out of that class was on long-term thinking.

Here's what he said -

One sentence changed my life…Ben Graham opened the course by saying: 'If you want to make money in Wall Street you must have the proper psychological attitude. No one expresses it better than Spinoza the philosopher.'

When he said that, I nearly jumped out of my course. What? I suddenly look up, and he said, and I remember exactly what he said: 'Spinoza said you must look at things in the aspect of eternity.' And that's what suddenly hooked me on Ben Graham.

Spinoza actually said, "Sub specie aeternitatis," which translates to "under the aspect of eternity," or "from the perspective of the eternal."

Critics of this idea may believe that with such thinking, there is no reason to believe that anything matters. But where Spinoza may be coming from is the idea that, in the larger scheme of things, nothing matters, which leads us to put our pains and struggles - including, as investors - into perspective.

Source: Seeking Alpha