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So the question is... if you had to chose, which would you invest in and why?

From your post, you seem to be focusing on measures that aren't important. I appended to this e-mail note some information on valuing stocks.

Investing like Warren Buffett requires looking at several factors, and the single most central tenent of Buffettology is selecting companies with high returns on equity. I recommend you read the book Buffettology by Mary Buffett for more information. It should be available at most public libraries, and you might even find it in the discount pile at a local bookstore.

After you read the book, then you may want to compare the strategies described in Buffettology with the strategies described in TMF's Rule Maker portfolio. The two strategies are similar, but the techniqies are different.

TMF subscriber ldorius (that's Ldorius) has written a spreadsheet to evaluate stocks according to Rule Maker criteria. User input is a stock ticker symbol and spreadsheet output is statistical information. You can get a copy of the spreadsheet from this link:

Please remember ldorius wrote and maintains this spreadsheet at no cost. If you find it useful, I'm sure he'd appreciate an e-mail thank you note.

Neither UST nor RJR would survive either the Buffettology or the Rule Maker selection process because neither stock is a market leader. Within the tobacco group, Philip Morris (MO) probably is the leader, but Philip Morris also owns Kraft Foods and Miller Brewing Company. Recall the tobacco group is vilified in the courts and in the press, which is another reason members of the group probably wouldn't survive either the Buffettology or Rule Maker selection processes.

If you're interested in investing in the tobacco group, I recommend you get a roster of the companies in the group, and then run those companies through ldorius' spreadsheet. You can get a roster of companies in the tobacco group from the link at the bottom of this paragraph. The page takes a minute to load -- be patient.

I own shares in Philip Morris (MO) through their sponsored Dividend Reinvesment Program. My annualized return over the past ten years is less than two percent. I keep hoping my investment in the company will yield better returns, but I'm just about ready to throw in the towel and seek my fortune elsewhere.

David Jacobs


There are at least four good sources of information on valuing stocks.

First, the Rule Maker Portfolio often talks about valuation. Here are links to some good articles, but you should check the Rule Maker Portfolio from time to time to see if they have new information.

Additionally, you should look at these articles:

And these articles on the P/E Ratio:

Second, the Fool's School has an article with lots of links about valuation. You can jump to the article from this link:

Third, TMF's Workshop Portfolio frequently discusses valuation. You can get there by selecting Investing Strategies from the link at the top of TMF's home page, and then selecting Workshop Port from the column on the left-hand side of the page.

Finally, David and Tom Gardner's book, Rule Breakers, Rule Makers, discusses techniques to assess the value of new companies in the Rule Breakers section, and the value of established companies in the Rule Makers section. You should check TMF's Rule Breakers Portfolio and Rule Makers Portfolio to see how the techniques have changed since the book was published.

Additionally, you also should look at Mary Buffett's book, Buffettology. Buffettology talks about investing from a business perspective. It's the same philosophy as the philosophy in the Rule Makers Portfolio, but the techniques are different.
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