Hi all-I am new to the discussion boards. I wanted to learn more about the Rule Maker strategy but I do not know where to start. Could somebody recommend a good post that explains the Rule Maker strategy to a new person? Or should I just go out and by the Rule Makers, Rule Breakers book and come back when I have read it? I am looking forward to interacting with all of you.Thank you for your time.Sincerely,Mike J
Greetings Mike,I think for a starting point there is a FAQ at http://boards.fool.com/Message.asp?id=1030058001213000 that would be my suggestion. Also, http://www.fool.com/school/13steps/13steps10.htm may also be of some help in getting the basics of Rule Makers down.Secondly, there are only a handful of posts to this board in 2004 and mine will be the third one this year so it may be that this board isn't that active if you are really looking for others to offer their opinions on possible Rule Makers.There is a group known as the Foolish Collective that have their board at http://boards.fool.com/Messages.asp?bid=115096 that may be a better place to go if you want to get a bunch of various opinions.HTH,JB
Mike,The links that JB provided do give you the necessary insights to understanding the Rule Maker philosophy, but since the Rule Makers aren't specifically followed any more, discussion on boards such as this one is scarce.Importantly, the Foolish Collective is indeed the place to go to continue discussing Rule Makers, though they're generally not referred to that anymore. The board was actually an offshoot of a Rule Maker stock-picking seminar the Fool held, and was a place where alumni of the seminar could go and continue discussing the stocks they had found. It used to be called the RM Foolish Collective board to signify its roots.Nowadays, it is open to everyone so the RM was dropped, Rule Makers are more generically discussed, and it is one of the most intelligent, civil places on the Fool to discuss stocks in general. Some of the smartest people on the Fool hang out there and welcome everyone in a friendly atmosphere where newbies are encouraged to ask even the most basic of questions. As you might imagine, I highly recommend it.Once upon a time, I used to hang out there regularly myself, until I became involved with the Hidden Gems newsletter and I cut my teeth on learning about investing, valuation, and more. I think you'll enjoy the experience.Rich
or just buy index funds and post here:http://boards.fool.com/Messages.asp?mid=22054626&bid=113358
JB, Rich, and StringCheeseMark-Thank you for your advice! Mike
Hi Mike,I'm not confused.I was a subscriber to the "rule maker" strategy in the late '90's and early 2000's. I don't think I have to describe the beating I took to anybody who was around then.What the strategy lacked at that time was a respect for P/E's. I don't profess to know what happened between the "rule maker 'we don't care what the stock costs' insanity" and it's evolutions. I do know that my view of equities is forever changed. If you are buying a stock (or a mutual fund containing stocks) that have a P/E ratio over 25 you are in line to be as big an idiot as I was 5 years ago. Welcome!
wqeberly-Thanks for the reply! It has been a while since I have looked at this board. Didn't Ben Graham say something similar, like anything above 20 times earnings was too high for most investors? What I do not understand is how certain stocks with high P/Es can be considered "bargains." It seems to me that as the price of one of these stocks increases, then any sort of future earnings are diluted by the amount paid for it. In other words, the possible earnings seem inconsequential to the high price.Mike
Greetings Mike, What I do not understand is how certain stocks with high P/Es can be considered "bargains."If the growth rate is sufficiently high I can see this. The point of this being that if a company can grow by say 50% a year for a few years this should allow for a higher P/E, no? Secondly, recognize that some "bargains" are because they are a relative value, e.g. the lowest in a group of 10 may not be cheap on an absolute basis but is relatively a bargain compared to the other 9.Just a couple of ideas,JB
That's why "P/E" is a poor metric. A high P/E isn't necessarily bad if there is growth to back it up, and a low P/E isn't necessarily good if there is no growth.A better metric (and much more difficult for most to do) is discounted cash flow (DCF). www.valuepro.net does an OK job with this. Their default numbers are good starting points. Sometimes I tweak their discount rate, though as I believe it often is low.1poorguy
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