There are some aspects of Benjamin Graham’s “enterprising investor” philosophy that have no appeal to me, because they don’t suit my style and also because I don’t believe that I have the skill set to execute in real life—for instance, Graham describes one type of enterprising investor as one who buys in low markets and sells in high markets. The reason that style does not suit my personality is because stock prices tend to track business performance (at least loosely) and the price of a stock is usually at its highest when its business performance is at its best. I’d want to be around reaping the benefit of Nike’s 16% dividend hike or Visa’s string of dividend growth north of 20%, not moving out while you are reaping the most fertile harvests of a company’s business cycle.
The second, and more logistical, reason why I don’t follow Graham’s first definition … Read the rest of this article!
Over time, if a company trades at wildly different valuations, the purchase price of the stock is going to mean that investors in the same company are going to have very different experiences with their holdings. For instance, investors in tobacco manufacturer Altria have seen the price of the stock fluctuate between 10x earnings and 20x earnings at various points in the past five years. Those investors are going to have very different experiences.
On the other hand, there is the well-known blue-chip stock Johnson & Johnson. The investor community generally understands that the company is a powerhouse with unassailable consumer brands (Band-Aids, Listerine, Johnson baby shampoo, etc.), medical device and equipment manufacturing, and a drug pipeline whose irregular yet high growth is “smoothed out” by the first two business categories.
Due to the widespread knowledge that Johnson & Johnston will most likely , Johnson & Johnson has traded at … Read the rest of this article!