On Oct. 17, the Dow Jones industrial average eclipsed 23,000 for the first time despite closing about 14 points shy of the milestone. Edition 4 of the “Forum Update” will summarize key highlights from the first half of October.
The top posts from early October
The top Forum posts discussed the following topics:
- “Keeping business or close the shop during recessions.”Â
- “How to research an industry.”Â
- “What is the name of the company trading at less than 2x FCF?”Â
Stock market valuations keep climbing as Dow breaks 23,000
Warren Buffett (Trades, Portfolio)’s market indicator continues to report new 10-year highs, climbing 1.2% during the two weeks since the Oct. 3 ratio of 137%. Based on the current valuations, the U.S. stock market is expected to return -1.5% per year over the next eight years.
The high market valuations suggest a market recession could occur at any time. A Forum user posted around Oct. 14 a dilemma investors may have during a pending recession: keep the business or close the shop. In other words, should I keep holding my stock position or sell it and minimize my loss potential?
According to my Forum response, the Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO once said the best way to not lose money is to invest in “good companies.” Such companies should have “predictable and proven earnings” as discussed in a 2008 GuruFocus research article.
Other key Forum posts
A second top Forum post from October discussed how to conduct industry research. Researching an industry requires more time than researching a stock. While stock research consists of reading quarterly and annual reports (10-Qs and 10-Ks), industry research requires deeper analysis, including some statistical analysis. For example, one might consider the distribution of Piotroski F-scores or Altman Z-scores across industries and compare the industry means and standard deviations.
We also started a game where Forum users try to guess a company stock given a few descriptions, similar to the game called “Who am I?” Buffett also once said “start with the A’s.” GuruFocus provides a Premium Plus feature called the Manual of Stocks, a stock manual where Forum users can look for “off the chart” companies from A to Z.
Please continue contributing valuable posts to our Forum. The top post at the end of October will receive a copy of “Invest Like a Guru,” our company’s winning book on value investing.
Disclosure: The author has no postions in the stocks mentioned.
