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|Subject: Re: Selecting stocks the Ben Graham way||Date: 12/17/2004 12:42 AM|
|Author: ZLegLogos||Number: 34995 of 46856|
I don't think Graham should be taken too literally, if only because of the time shift factor. Because Zweig does a superb job of updating him IMO, you pretty quick catch on what he's after. While he never specifically embraces the "random walk on Wall Street" school, facts are most investors would be better off buying the S&P 500 than doing what they do. So, with a lot of well-based and repeated argument, I think he counsels humility.
And Grahams hadn't TIPS, spiders, and index funds at his disposal, and did not need to contend with wholesale abuse of stock options as compensation, stagflation, and corporate management being press corps. Buffet & Munger have addressed these in some of their interviews.
Irrespective of what you might think of Graham, his basic philosophy today would say that if you can't consistently beat the market averages in all circumstances, your investment algorithm is broke.
I'm surprised there isn't more discussion of his formula than his "values investing philosophy". That's his scheme whereby you take your investable assets, divide in two halves, one in stocks or equivalents, one in bonds or equivalents. If the stock side goes up to 55% or better, sell off 5% and invest on the bond side. When the stock side drops to 45% or less, sell enough of the bond side to bring the stock side back to 50%. Always invest in value companies or their equivalent.
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