Tag Archives: Benjamin Graham

Business, Finance, Occupation & Industry

3 Beach Reads That Will Make You a Way Better Investor

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By Michael Lewis

Best investing books

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For those who have had the pleasure of completing an undergraduate finance program, it is a mild surprise (to say the least) to find that the real world of finance and investing is quite different from the efficiency-laden lessons of academia.

While this is frustrating to those who paid the price in time an tuition, it should be encouraging to the average investor who has no formal education in the subject. The truth is, right now, retail stock pickers have the same tools and tricks available to them as the world’s most successful investors.

So, in the spirit of summertime leisure, here is a hot list of books for investors that will get you on par with the very best.

The Classic Text

To recommend “The Intelligent Investor” is by no means a novel idea (pun absolutely intended), but it is, by far, the greatest quick read on the subject of stock picking. Written by Warren Buffett‘s mentor, Benjamin Graham, “The Intelligent Investor” provides the mental lattice all investors would do well to cling to.

Sure, the book champions value investing, which is not the only way to invest, but it can help investors of all kinds — even those interested in the next big technology winner.

Graham spells out the difference between speculation and investing — a concept that is often cited but which few seem to truly espouse. The Columbia professor and investing guru uses the allegory of Mr. Market to describe the battiness of the public markets, and how you can use that to your advantage.

While academic finance touts Efficient Market Theory — the idea that securities are priced with near perfection at all times — Graham posits nearly the opposite: Stocks can fall out of favor for reasons that do little to reflect the intrinsic value of a company — creating a price rift. Graham, Buffett, and the majority of the world’s greatest stock pickers believe that stocks drift toward that intrinsic number over time. Their track records support the claim.

With clear explanations of concepts such as margin of safety and defensive investing, “The Intelligent Investor” should be No. 1 on every investor’s reading list.

The Everyman Investor’s Bible

Peter Lynch, vice chairman of Fidelity’s investment advisory and former manager of the Fidelity Magellan Fund — the strongest performer of its (and his) kind from 1977 to 1990 — is great at writing simple, actionable investment lessons.

“One Up on Wall Street” is the shining example on the subject of DIY investing.

Though “The Intelligent Investor” is itself a very readable, simple book, Lynch’s classic explains in plain language strategies you may already employ. For example, Lynch loves “buy what you know,” the art of walking down the street and observing which brands are moving fast and which stores have lines …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

An Island of Sanity in a Volatile Market

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By Chuck Saletta, The Motley Fool

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As the market zigzagged over the past couple of weeks, the real-money Inflation-Protected Income Growth portfolio just kept humming along, collecting dividends and buying shares. Since the last general update near the end of March, the portfolio is up a couple hundred dollars, which isn’t bad given the near-daily whipsaw it feels like we’ve been riding recently.

The secret to the portfolio’s success isn’t much of a secret at all. Instead, it’s a time-tested approach to investing inspired by Benjamin Graham, the father of value investing and the man who taught investing to Warren Buffett. By combining the benefits of dividends, valuation, and diversification into one single vehicle, the iPIG portfolio is designed to let the companies behind the stocks, not the market‘s daily fluctuations, drive the investment returns.

So what did happen?
While the overall message was one of relative calm, the market‘s machinations did provide the iPIG portfolio the opportunity to pick up shares of Emerson Electric . As a company with over 55 years of consistently rising dividend payments, it’s a natural fit for a portfolio that seeks to invest in an increasing income stream. Yet until the market was so kind as to knock down Emerson’s price to a more reasonable level, it was simply too pricy to justify buying.

Additionally, Becton, Dickinson made good on its dividend pledge, handing the iPIG portfolio $8.91 for the 18 shares it holds ($0.495 per share). That was the second consecutive dividend by Becton, Dickinson at that level. Should the medical device titan follow recent trends, I anticipate that it could increase its dividend near the end of the year for its December payment.

Not to be outdone, Genuine Parts also continued its long streak of paying and increasing dividends. The iPIG portfolio picked up $12.36 for its 23 shares ($0.5375 per share). That was Genuine Parts‘ first dividend payment at its new higher rate, and like Emerson Electric, Genuine Parts can celebrate more than 55 consecutive years of increasing dividends.

Finally, Union Pacific kept moving money into the iPIG portfolio’s pocket, handing the portfolio $4.14 for the six shares it holds ($0.69 per share). As with Becton, Dickinson, that was Union Pacific‘s second dividend at its current level. Should that railroad giant keep with its pattern, it’d be on track to raise its dividend near the end of the year, as well.

And what comes next?
None of the companies in the iPIG portfolio are expected to pay dividends in the next week or so, but the portfolio still has a touch more than $3,000 in cash that it can deploy. About half of that is in a limit order waiting to see if the market will offer another opportunity to buy the stock that might get away. The other half? It’s available if the market offers up another compelling opportunity like it did last week with Emerson Electric.

To follow …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why It Pays to Invest in CEOs

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By Tamara Rutter, The Motley Fool

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There’s no denying that the visionary leadership of Steve Jobs helped make Apple the most valuable company in the world. Forward-thinking CEOs such as Jobs often have far-reaching effects on the success of a company. When Jobs returned to a sinking Apple in 1996, it was his vision that ultimately propelled the company to greatness. In fact, Apple’s annual sales tripled and its stock increased more than 1,300% following his return.

Today, there are plenty of other like-minded leaders currently dominating their industries. Evaluating top CEOs and their respective management teams can be a useful tool in uncovering winning stocks. Let’s look at some of the CEOs that are working to create long-term value for their companies and stockholders. We’ll also uncover two rising stars to keep on your radar.

Taking the long view
Too often, the CEOs of public companies bend to meet short-term goals laid out by analysts and shareholders. This isn’t too surprising considering most CEO compensation plans are closely tied to quarterly earnings and annual performance metrics. Interestingly, historical data has shown that the most successful companies are those whose leaders instead took the long view.

Every year, the Harvard Business Review reveals its selection of the best-performing CEOs in the world. Not surprisingly, Steve Jobs topped the list as the best-performing chief executive officer of the past 17 years. Amazon.com‘s  Jeff Bezos grabbed the No. 2 spot in the 2013 ranking. Since founding the company in 1995, Bezos has proven he isn’t afraid to sacrifice near-term profits for long-term growth — a trait shared by the former Apple founder.

Since launching Amazon, Bezos has grown the company from a modest online seller of books into the world’s top online retailer. With Bezos at the helm, the company’s market value has increased by a whopping $111 billion. Additionally, Bezos ranked in the top 20 highest-rated CEOs for 2013 by Glassdoor, with a 93% employee approval rating. Shares of Amazon are up nearly 3% year to date, trading at around $255 apiece.

On whether or not he cares about Amazon’s share price, Bezos referenced the Benjamin Graham quote: “In the short term, the stock market is a voting machine. In the long term, it’s a weighing machine.” Bezos later said, “We try to build a company that wants to be weighed, not voted on,” according to an interview with Harvard Business Review.

This strategy has worked well for Amazon. In fact, since Bezos started the company it has delivered shareholder returns of 12,266%. The retailer’s offbeat leader has famously said, “I believe you have to be willing to be misunderstood if you’re going to innovate.” It is in this spirit that I introduce what I feel is the new breed of visionary CEOs.

Rising stars
Some up-and-coming CEOs to keep an eye on include Marissa Mayer, the new face of Yahoo! , and Elon Musk of Tesla Motors .

Mayer’s entrance at Yahoo! last year marked the beginning …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Real Money, Meet Real Returns

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By Chuck Saletta, The Motley Fool

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The real-money Inflation-Protected Income Growth portfolio launched in early December 2012, with an initial $30,000 in capital. The portfolio’s primary goal is investing in a way that produces an income stream that grows at least as fast as inflation over time.

That’s easier said than done, especially in this era when money in the bank isn’t necessarily safe anymore, and dividend cuts to preserve capital are often needed to assure a company’s survival. The iPIG portfolio attempts to buffer itself against risks like that through paying attention to each pick’s valuation and by investing with an eye towards diversification, as well as to each company’s dividends.

The strategy is based on the writings of Benjamin Graham, the father of value investing and the man that taught investing to Warren Buffett, so there’s hope that it’ll work out over time. Still, it’s fair to ask how those principles are holding up today, especially in light of the economic and market chaos emanating from Cyprus.

So, how is it going?
The table below shows every selection of the iPIG portfolio that has been successfully turned into a real-money investment. There’s one additional pick that ran up before it could be purchased, but the iPIG portfolio has an open limit order in the hopes that it may fall back into the “buy” range.

Company

Purchase Date

# of Shares Owned

Total Cost (including commissions)

Current
Value as of
March 25, 2013

United Technologies

Dec. 10, 2012

18

$1,464.82

$1,670.40

Teva Pharmaceuticals

Dec. 12, 2012

38

$1,519.40

$1,519.62

JM Smucker

Dec. 13, 2012

17

$1,483.45

$1,638.46

Genuine Parts

Dec. 21, 2012

23

$1,476.47

$1,755.82

Mine Safety Appliances

Dec. 21, 2012

36

$1,504.96

$1,771.20

Microsoft

Dec. 26, 2012

55

$1,499.15

$1,548.80

Hasbro

Dec. 28, 2012

43

$1,520.60

$1,877.81

NV Energy

Dec. 31, 2012

84

$1,504.72

$1,660.68

United Parcel Service

Jan. 2, 2013

20

$1,524.00

$1,692.20

Walgreen

Jan. 4, 2013

40

$1,501.80

$1,847.60

Texas Instruments

Jan. 7, 2013

47

$1,515.70

$1,620.56

Union Pacific

Jan. 22, 2013

6

$805.42

$823.14

CSX/p>

Jan. 22, 2013

34

$712.50

$812.26

McDonald’s

Jan. 24, 2013

16

$1,499.64

$1,571.84

Beckton, Dickinson

Jan. 31, 2013

18

$1,518.64

$1,663.74

Aflac

Feb. 5, 2013

27

$1,466.35

$1,391.04

Air Products & Chemicals

Feb. 11, 2013

17

$1,510.99

$1,486.99

Raytheon

Feb. 22, 2013

27

$1,473.91

$1,532.52

Cash

      

$4,624.95
     

Data from the iPIG portfolio brokerage account, as of March 25, 2013.

The iPIG portfolio has been in existence for just over a quarter and has purchased 18 stocks, with two of those being half-size positions to build a national railroad network. The portfolio’s total value is nearly 8.4% above its starting level, and several of the picks have already increased their dividends. While it’s way too early to call the portfolio an overall success, the early news has been incredibly strong.

In-market results highlights and lowlight
Toy maker Hasbro has far surpassed expectations from a return-on-investment perspective, up an astounding 23.5% since being bought in late December. This is something of a surprise, especially since Hasbro missed expectations for the recent all-important winter holiday season. Still, Hasbro’s stock was bought at such a discount to its intrinsic value estimate that it hasn’t quite hit the sell range, yet. If it keeps climbing, though, it might earn the honor of being the first pick to be sold based on valuation.

Similarly, drugstore giant Walgreen has also risen an amazing 23% since being bought …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

My Top 2 Stocks: Berkshire Hathaway and Waste Management

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By Robert Eberhard, The Motley Fool

WFC Chart

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I haven’t been in the investing “game” for that long, but my two largest holdings are among the first shares that I purchased when I started getting serious about investing. One is a behemoth with revenue streams among multiple industries, while the other leads the way in its very important industry. It is easy to see why they’re leading the way in my modest portfolio.

Barring any major surprises, Berkshire Hathaway and Waste Management should maintain the top two spots in my portfolio for the near future and are on my short list for receiving more of my investing funds in the next couple of months. Though the reasons I chose the companies were different, I have been pleased with my decision thus far and hope for continued great performance from both companies.

Why Berkshire Hathaway?
When I became serious about investing early last year, I was looking for a strong foundation to start out my small portfolio on the right foot. I was looking for a company that had a long track record of market-beating performance, but also one that I thought would continue to do so for the foreseeable future. As a fan of value investing, particularly Benjamin Graham, I figured a great place to start would be with the company run by Warren Buffett, perhaps Graham’s most famous student and one of the world’s best investors.

Berkshire Hathaway is a unique company, and investors in it get rewarded in a multitude of ways. One way is to reap the benefits of its multitude of wholly owned subsidiaries across a variety of industries. Berkshire is perhaps best known for its insurance operations, led by GEICO, but the non-insurance companies it owns also add a lot of money to the Berkshire coffers. Last year, Berkshire’s five most profitable non-insurance companies — including the BNSF railroad and Mid-American Energy — earned more than $10 billion for Berkshire and its shareholders last year. Quite an impressive number.

Investing in Berkshire Hathaway also allows you to share in the performance of the company’s stock portfolio, which is full of stock picks from not only Warren Buffett and Charlie Munger, but also Todd Combs and Ted Weschler, two men Buffett picked to manage an ever-growing portion of Berkshire’s investment funds. Berkshire’s four largest holdings all saw gains during the past year, helping to boost the performance of Berkshire as a whole:

WFC data by YCharts.

Berkshire Hathaway is a company that I’m comfortable owning for a very long time and one that I don’t really worry about. Despite its recent run to new heights, I’ll be adding more to my holding over the next few months to truly benefit from one of the greatest companies out there.

Why Waste Management?
I added Waste Management to my portfolio when I was looking for a strong and sustainable …read more
Source: FULL ARTICLE at DailyFinance

News, Politics, Government

A Reminder Of The Celebrity And Controversy Around Star Investor Bruce Berkowitz

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By Abram Brown, Forbes Staff Up at 115th Street in Manhattan, a group of finance‘s finest minds gather each year, flying in from across the country. They come at the invitation of Columbia University, which hosted the most recent get-together on Friday in a concrete building near the iconic black wrought-iron Morningside Gates. There, they discussed strategy, as well as Benjamin Graham, favorite son of Columbia and a founding father of modern investing.
Source: FULL ARTICLE at Forbes Latest