Graham’s 7 Rules for Defensive Investors
Posted in Investment on Jan 31st, 2009
Here is what you, as a relatively conservative investor, should consider when picking up individual stock:
1. Adequate size. No stock smaller than 2 billion market capital (as of 2002).
2. Strong financial condition. At least 2-to-1 current ratio (current assets : current liabilities) and more working capital than long-term liabilities (working capital = current assets - current liabilities).
3. Earning stability. Positive earnings for each of the past 10 years.
4. Dividend record. Dividends paid for at least past 20 years.
5. Earning growth. EPS grows at least one-third over the past 10 years. (averaged last 3 years of the 10 year period v.s. averaged initial 3 years of the 10 year period.)
6. Moderate P/E ratio. No more than 15 times. (P/E ratio is derived from by dividing current price by averaged earnings over the past 3 years.)
7. Moderate price-to-book ratio. No more than 1.5. (Though most stock nowadays are at higher ratios than Graham’s day because of higher proportion of intangible assets.)
- Extracted from Chapter 14, The Intelligent Investor, Benjamin Graham, Jason Zweig (Commentary)
真的要慶幸我們生活在在如此美好的年代。整個市場不管好貨爛貨，都在跳樓大拍賣啊！
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