I received this question recently from one of my readers:
“hi tim, i love your articles. i have a question for you. With the dow at >15,000 how aggressively would you buy exxon, pg, jnj etc. would you buy 100 shares then wait for a pull back? Thanks, manoj”
Hi Manoj. When we make investments, one of the best weapons we have in our arsenal is the ability to make each investment one at a time. The fact that the Dow Jones is trading above 15,000 (or whatever figure might be dominating the headlines) says little about the valuation specifics of each company. For instance, Aflac typically traded at 250-400% of book value, and 15-25x earnings, before the financial crisis hit. Nowadays, the company trades at 100-170% of book value and only trades at 7-9x earnings, despite the fact that Aflac’s portfolio is now of higher quality than it was before The Great Recession hit.