I discovered some great lectures from Benjamin Graham when he was a professor at Columbia University. There are a total of ten lectures which are from Graham's class in 1946. I summarized the main points of each and something new I learned from it.
This is great information that you will not read in either The Intelligent Investor orSecurity Analysis. I will be going through all ten lectures and releasing them over the next few days. To see Part I click here, to see part II click here http://www.gurufocus.com/news.php?id=119551, part III is here: http://www.gurufocus.com/news.php?id=119662, and part IV is here: http://www.gurufocus.com/news.php?id=119707. Part V is here http://www.gurufocus.com/news.php?id=119765
The Rediscovered Benjamin Graham Lectures – 6
In part six of Benjamin Graham’s lectures, we end up seeing a very short and concise few points which were made. Graham hits on a few topics where he gets right to the point and then fairly quickly ends it right away. It definitely puts in a great few points to think about despite being such a short discussion.
The very first item that he deals with is what analysts are really doing by trying to calculate expected future earnings. He wants to be sure to let the audience know that an analyst is not (and should never) present the earnings as though they already could tell exactly what the business would do in the future. In fact, many times those earnings are wrong and need to be readjusted as soon as new information is revealed. However, he does want it to be clear that the analyst should be using future earnings to try and get a “good idea” of what the future will look like in respect to logical expectations. The formulas are there for a reason, but by no means should the earnings be taken as if they were gold.
Graham goes on to mention a few points about how during a study of a dozen or so stocks as far back as 1914, the earnings reports did not come out as expected at all. While he expected them to hit a certain earnings level, when the earnings was recalculated after the period of war, they ended up almost half and half showing a larger than or less than expected earnings rate. This was unacceptable because during that period of time our country went through a great depression, and, as he states directly in the article, “You do not gain as much from periods of unusual prosperity as you lose in periods of depression when you are in business.”
He goes on to state that it is far more important to stress that you cannot make investment decisions based upon deeming a given level of prices acceptable because they aren’t too high; you must ensure that the price is actually too low from an analysis point of view. By doing this you guarantee that you are actually purchasing ownership in a company that is undervalued and primed for success instead of simply playing in the securities market. This can be exceptionally beneficial when an individual is dealing with a down market both economically as well as psychologically.
Graham then makes a few quick points in favor of group evaluation, in which he suggests it can be very beneficial when it comes to evaluations. By computing a pool of companies and stocks where the outliers can cancel and the averages will represent more concrete values, you most likely will not get an outlying value as your answer. By purchasing groups of bargain issues all together, Graham also suggests that you can obtain a major advantage. And, while you may not be able to realize the advantages on the individual level, you should definitely be able to capitalize on the bargain advantages while purchasing securities in a group.
http://www.valuewalk.com/
This is great information that you will not read in either The Intelligent Investor orSecurity Analysis. I will be going through all ten lectures and releasing them over the next few days. To see Part I click here, to see part II click here http://www.gurufocus.com/news.php?id=119551, part III is here: http://www.gurufocus.com/news.php?id=119662, and part IV is here: http://www.gurufocus.com/news.php?id=119707. Part V is here http://www.gurufocus.com/news.php?id=119765
The Rediscovered Benjamin Graham Lectures – 6
In part six of Benjamin Graham’s lectures, we end up seeing a very short and concise few points which were made. Graham hits on a few topics where he gets right to the point and then fairly quickly ends it right away. It definitely puts in a great few points to think about despite being such a short discussion.
The very first item that he deals with is what analysts are really doing by trying to calculate expected future earnings. He wants to be sure to let the audience know that an analyst is not (and should never) present the earnings as though they already could tell exactly what the business would do in the future. In fact, many times those earnings are wrong and need to be readjusted as soon as new information is revealed. However, he does want it to be clear that the analyst should be using future earnings to try and get a “good idea” of what the future will look like in respect to logical expectations. The formulas are there for a reason, but by no means should the earnings be taken as if they were gold.
Graham goes on to mention a few points about how during a study of a dozen or so stocks as far back as 1914, the earnings reports did not come out as expected at all. While he expected them to hit a certain earnings level, when the earnings was recalculated after the period of war, they ended up almost half and half showing a larger than or less than expected earnings rate. This was unacceptable because during that period of time our country went through a great depression, and, as he states directly in the article, “You do not gain as much from periods of unusual prosperity as you lose in periods of depression when you are in business.”
He goes on to state that it is far more important to stress that you cannot make investment decisions based upon deeming a given level of prices acceptable because they aren’t too high; you must ensure that the price is actually too low from an analysis point of view. By doing this you guarantee that you are actually purchasing ownership in a company that is undervalued and primed for success instead of simply playing in the securities market. This can be exceptionally beneficial when an individual is dealing with a down market both economically as well as psychologically.
Graham then makes a few quick points in favor of group evaluation, in which he suggests it can be very beneficial when it comes to evaluations. By computing a pool of companies and stocks where the outliers can cancel and the averages will represent more concrete values, you most likely will not get an outlying value as your answer. By purchasing groups of bargain issues all together, Graham also suggests that you can obtain a major advantage. And, while you may not be able to realize the advantages on the individual level, you should definitely be able to capitalize on the bargain advantages while purchasing securities in a group.
http://www.valuewalk.com/
