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  • SerenityStocks commented on Jonathan Poland's article 06-25 16:12
    Simpson and Buffett BOTH own this wide moat stock.
    Precision Castparts (PCP) was founded in Portland, Oregon circa 1949. The company manufactures structural investment castings, forged components and...
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    SerenityStocks 06-25 17:12
    • Benjamin Graham - also known as The Dean of Wall Street - was a scholar and financial analyst who mentored legendary investors such as Warren Buffett (Trades, Portfolio), William J. Ruane, Irving Kahn and Walter J. Schloss.

      Warren Buffett (Trades, Portfolio) once gave a speech at Columbia Business School explaining how Graham's record of creating exceptional investors (such as Buffett himself) is unquestionable, and how Graham's principles are everlasting. The speech is now known as "The Superinvestors of Graham-and-Doddsville".

      Graham's first recommended strategy - for novice investors - was to invest in Index stocks. 

      For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them. 

      For professional investors, Graham described various special situations or "workouts".

      For example, given below are the actual Graham ratings for Precision Castparts Corp (PCP), with no adjustments other than those for inflation.

      Defensive Graham investment requires that all ratings be 100% or more.

      Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

      Precision Castparts Corp (PCP) - Graham Ratings

      Sales | Size (100% ⇒ $500 Million): 2,020.00%

      Current Assets ÷ [2 x Current Liabilities>: 171.24%

      Net Current Assets ÷ Long Term Debt: 109.25%

      Earnings Stability (100% ⇒ 10 Years): 90.00%

      Dividend Record (100% ⇒ 20 Years): 100.00%

      Earnings Growth (100% ⇒ 30% Growth): 214.34%

      Graham Number ÷ Previous Close: 64.90%

      Note: Stocks failing Graham's rules are not necessarily bad investments. They may fall under Graham's "special situations" category. Graham's rules are also extremely selective.

      Most of Buffett's investments are what Graham defined as Special Situations.
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