Over one tumultuous 30-year stretch
that included the Great Depression, the
Dow Jones Industrials Average returned
only +224%. But Benjamin Graham, the
father of value investing and Warren
Buffett's mentor, handily beat
the overall market and scored what total return for
his clients during that period?
A.) 554%
B.) 789%
C.) 1,439%
D.) 4,659%
E.)
11,006%
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Published:
May 12, 2008
The
correct answer is
(E.) 11,006%
That's right -- according to Brandes
Investment Partners, Ben Graham's
clients earned more than +11,000%, or
annualized returns of +17%, during
an extremely difficult 30-year span
that saw the Dow return only about
+4% annually.
How did he do it? By being
objective.
Rather than try to predict where
share prices are headed in the
short-term, he believed it was far more
productive to calculate a firm's
intrinsic value, and then only
invest in those trading for
significantly less than what they're worth.
While this makes perfect sense to most
investors, the reality is that
many people do not move past the
theory and apply these principles.
One investor who has is Warren
Buffett. Well-known by most
investors, many may not realize that
Buffett honed his craft under
Graham's tutelage and still applies
many of the same principles today.
And Nathan Slaughter,
editor of StreetAuthority's
value-investing newsletter
Half-Priced Stocks,
has studied both Graham and Buffett
for years and applies their
principles to the ideas he brings
readers every month. In a recent
issue of his newsletter, Nathan
pinpointed eight
companies that passed many of
the very hurdles Ben Graham
demanded in an investment. These
value picks include one company that
has the potential to rise nearly
+100% before it reaches the
neighborhood of its fair value. To learn
the names of these stocks, and to
learn more about the
Half-Priced
Stocks newsletter, please
visit this
link.
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