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To calculate the classic (Trouncing the Dow) Benchmark Investing downside price target you need 10 years of historic data. I'll be using one of the new Dow compoments PFE as my example. I'm using it since VL gives this data away for free (http://www.valueline.com/dow30/f7040.pdf), so I don't anticipate any trouble if I reproduce the numbers here.

Collect 10 years of High prices, Low prices, Book Value per sh, Return on Shr. Equity. Since it is 2004, use 1994-2003 as the historical data. 2004 data will serve as my estimates for Book Value and Return on Shr. Equity. Here's the PFE data:
`                     1994 1995 1996 1997 1998 1999 2000 2001 2002 2003High Price            6.6 11.1 15.2 26.7   43   50 49.3 46.8 42.5 36.9Low Price             4.4  6.2   10 13.4 23.7 31.5   30   34 25.1 27.9Book Value           1.15 1.44  1.8 2.04 2.27 2.31 2.55 2.91 3.24 8.53Return on Shr Equity   30 28.2 27.7 27.9 29.9 38.2 40.4 45.6 47.9 19.5`

According to the author Ken Lee, if there are years where the Return on Shr. Equity is marked NMF, then all the data for that year is tossed out. I've extended this to include throwing out data if the hi and lo prices are missing (Frequent occurance in Midcap data), or there is price data but no BV or ROE data (very infrequent). I'll show JPM in another message since it has missing price data.

For each of these items calculate the 10 year average.
10Y avg High Price: 32.81
10Y avg Low Price: 20.62
10Y avg BV: 2.824
10Y avg ROE: 33.53

Now get the 2004 BV and ROE and calculate the Adjusted ROE which is the 2004 ROE divided by the 10Y avg ROE.
2004 BV: 9.60
2004 ROE: 22.0

Now we're ready to calculate the 10Y Downside Price. This is the price below which the stock becomes attractive from a value perspective. The formula to calculate downside price is:
Downside = (10Y Avg Low Price)/(10Y avg BV)*(2004 BV)*(Adjusted ROE)
Downside = 20.62/2.824*9.6*0.656 = 45.98

PFE's current price is 35.43, so it is trading at a hefty discount to its downside price, which would indicate it's a bargain.

To the nitpickers out there who check the downside at the benchmarkinvesting.com site, you'll find a one cent discrepancy due to roundoff error, since I clipped the adjusted ROE at 3 decimal places.

- Lee

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