Pg 112: Buffett's goal is to select companies in which each dollar of retained earnings is translated into at least one dollar of market value. This test can quickly identify companies whose managers over time, have been able to optimally invest their company's capital. If retained earnings are invested in the company and produce above-average return, the proof will be a proportionally greater rise in the company's market value. The Essential Buffett by Robert G Haagstrom, John Wiley & Sons, Inc.

Pg 112-113: The argument we made for common stocks in 1949 turned on two main points. The first was that they had offered a considerable degree of protection against the erosion of the investor's dollar caused by inflation, whereas bonds offered no protection at all. The second advantage of common stocks lay in their higher average return to investors over the years. This was produced both by an average dividend income exceeding the yield on good bonds and by an underlying tendency for market value to increase over the years in consequence of the reinvestment of undisturbed profits. The Intelligent Investor by Benjamin Graham updated with new commentary by Jason Zweig.

Pg 39: Look for companies that create high return on equity with minimal debt. The Essential Buffett by Robert G Hagstrom, John Wiley & Sons, Inc.

Pg 273: It's a very sad thing. You can have somebody whose aggregate performance is terrific, but if they have a weakness, maybe it's with alcohol, maybe it's susceptibility to taking a little easy money, it's the weak link that snaps you. And frequently, in the financial markets, the weak link is borrowed money. Buffett: The Making of an American Capitalist by Roger Lowenstein, Doubleday.

Pg 33: check the percentage of the firm's total capitalization represented by long-term debt or bonds. Usually the lower the debt ratio, the safer and better the company. A corporation that has been reducing its debt as a percent of equity over the last two or three years is well worth considering. How to Make Money in Stocks by William J O'Neil, McGraw Hill.

Pg 114: Each company selected should be large, prominent, and conservatively financed. Indefinite as these adjectives must be, their general sense is clear. The Intelligent Investor by Benjamin Graham updated with new commentary by Jason Zweig.

Pg 59: This debt-to-equity ratio is a common measure of a company's risk level. Debt financing (also called leverage) is considered riskier than financing with stockholders' equity because the interest payments on debt must be made every period (they are legal obligations), whereas dividends on stock can be postponed if (the company) has a bad year. Financial Accounting by Libby, Libby and Short, Irwin/McGraw-Hill.

Pg 201: A normal corporate balance sheet has 75 percent equity and 25 percent debt. A week balance sheet, on the other hand, might have 80 percent debt and 20 percent equity. Among turnaround and troubled companies, I pay special attention to the debt factor. More than anything else, it's debt that determines which companies will survive and which will go bankrupt in a crisis. Young companies with heavy debt are always at risk. One Up On Wall Street by Peter Lynch with John Rothchild, Penguin.

Guru Acknowledgements xxvii-xxviii: John Buckingham is president and chief portfolio manger of money manager Al Frank Asset Management, and editor of the Prudent Speculator newsletter. Buckingham follows classic investment strategies, buying underpriced firms with long-term track records and holding them as long as it takes. He prefers firms with plenty of cash in the bank, strong cash flow, and low debt. Buckingham favors the price/sales ratio to measure value. Thatcher Thomson is a Merrill Lynch analyst specializing in the business services sector. Factors he considers important are revenue visibility, a company's position vis a vis the competition, sales growth and earnings growth, margins, cash flow versus net income, and low debt. Thompson's red flags include negative earnings surprises and/or reduction in guidance, departure of the CFO, growth by acquisition combined with declining margins, or declining cash flow combined with rising receivables. Fire Your Stock Analyst! Analysing Stocks On Your Own by Harry Domash, FT Prentice Hall.

Pg 65: The Dow 10 strategy, which calls for investors to buy the ten highest-yielding stocks in the Dow - Jones Industrial Average, has been regarded as one of the most successful investment strategies of all time. James Glassman of the Washington Post claimed that John Slatter, a Cleveland investment adviser and writer, invented the Dow 10 systems in the 1980s. The basic theory behind the Dow 10 strategy grounded in value investing. Since firms reduce cash dividend payouts infrequently, stocks with a high dividend yield are often those that have fallen in price and are out of favor with investors. For this reason the Dow 10 strategy is often called the dogs of the Dow. The Dow 10 strategy of investing in the highest yielding 10 stocks of the Dow has worked: Since 1928, the average compound return on the Dow 10 of 13.21 per cent per year has exceeded the equally weighted Dow 30 by 1.81 percent annually, and the S&P 500 index by 2.57 percent per year over the whole period.

Pg 66: The Dow 10 strategy has outperformed both the overall Dow and the S&P 500 Index in every decade except the 1930s, besting the Dow 30 by an average of 3.26 percent per year and the S&P 500 Stock Index by an even larger 3.7 percent per year since 1939.

Pg 67: Why has the Dow 10 strategy worked? There are two reasons: first, and most important, a value-based strategy based on a group pf superior survivor firms; second, a high-dividend strategy.

Pg 80: I have shown that the real return on equity, the sum of the dividend yield, and price appreciation has averaged about 7.0 percent over long periods of time. For the 2 percent dividend yield prevailing in the late 1990s, this means that real share prices must appreciate at 5 percent per year to maintain.

Pg 100: Another favorite value-based criterion for choosing stocks is dividend yields. A strategy based on the highest yielding stocks in the Dow Jones Industrial Average outperformed the market. Research by Krishna Ramaswamy and Robert Litzenberger nearly 20 years ago established subsequent returns (See Robert Litzenberger and Krishna Ramaswamy, The Effects of Personal Taxes Dividends on Capital Asset Prices: Theory and Empirical Evidence, Journal of Financial Economics, 1979, pp. 163-95). More recent studies by James O'Shaughnessy have shown that from the period 1951 through 1994, the 50 highest dividends-yielding stocks had a 1.7 percent higher annual return among stocks with a capitalization of at least $1 billion. (James O'Shaughnessy, What Works on Wall Street, McGraw-Hill, 1997, pp.123-32). Stocks for the Long Run by Jeremy J Siegel, McGraw Hill. Why do the high prices of stocks affect their dividend yields? A stock's yield is the ratio of its cash dividend to the price of one share of common stock. If a company pays a $2 annual dividend when its stock price is $100 per share, its yield is 2%. But if the stock price doubles while the dividend stays constant, the dividend yield will drop to 1%. The Intelligent Investor by Benjamin Graham updated with new commentary by Jason Zweig. Geraldine Weiss has been publishing her Investment Quality Trends newsletter for more than 30 years. Weiss' strategy hinges on tracking blue-chip stock's dividend yields. In our interview, Weiss stressed the importance of strong institutional sponsorship, in fact if my notes are correct, she said that there is never too much institutional ownership. Fire Your Stock Analyst! Analysing Stocks On Your Own by Harry Domash. If investors are sure that the high yield will hold up, they'll buy the stock just for that. This will put a floor under the stock price. Blue chips with ling records paying and raising dividends are the stocks people flock to in any sort of crisis. One Up On Wallstreet by Peter Lynch with John Rothchild.

Long Run U.S. Experience on Small Caps, Large Caps vs other investments.

Pg 115: A study by Ibbotson and Associates, the esteemed Chicago research firm that tracks the performance of stock and mutual funds, shows that from 1940 to 1993, small-cap stocks posted average annual returns of 15.9 percent, versus a large-cap return of 11.7 percent, over the corresponding period. That may look like 4 percent but when you compound that return over those 54 years, the difference is huge. A $1,000 investment earning 15.9 percent annually is worth $2.89 million 54 years later: a $1,000 investment bringing in 11.7 percent over that time ends up worth just $0.39 million, or $390,000. The Motley Fool Investment Guide by David & Tom Gardner, Fireside, Simon & Schuster.

Pg. 58-60: The U.S. Experience: The data indicates that a dollar invested in treasury bills at the end of 1925, with all income reinvested, would have grown fifteen times by December 31, 1998. At first glance, having multiplied the original investment by a factor of fifteen appears satisfactory. However, given that 60 percent of the increase would have been lost to inflation, the result is not particularly impressive. The 15 multiple for investing in treasury bills, the 44 multiple for investing in treasury bonds, and the 61 multiple for investing in corporate bonds represent long-term rewards for lending money. A dollar invested in common stock at the end of 1925 would have multiplied 2,351 fold during the seventy-three-year holding period. An enormous difference exists between the return expected from the conservative investment in cash (fifteen times) or government bonds (forty-four times) and that expected from taking the greater risk in owning securities (2,351 times). When investors assume more risk by investing in smaller-capitalization equities, the dollar goes 5,117 times during the period, a staggering amount relative to returns for other asset classes.

Pg 65: High-Risk Equities hit occasional air pockets. During the 1929-32 depression, small cap stocks fell more than large cap stocks. The wealth multiple of small cap stocks had declined from 1.00 times on November 30,1928 to 0.46 times by December 31, 1929 and 0.10 times by June 30,1932. Pioneering Portfolio Management by David F Swensen, The Free Press.

Pg 98: How big is this company in which you've taken interest? Specific products aside, big companies don't have big stock moves. In certain markets they perform well, but you'll get your biggest moves in smaller companies. You don't buy stock in a giant such as Coca-Cola expecting to quadruple your money in two years. If you buy Coca-Cola at the right price, you might triple your money in six years, but you're not going to hit the jackpot in two. Sometimes a series of misfortunes will drive a big company into desperate straits, and as it recovers, the stock will make a big move. But these are extraordinary situations that fall into the category of turnarounds. In the normal course of business, multibillion-dollar enterprises simply cannot grow fast enough to become ten baggers.

Pg 99: Everything else being equal, you'll do better with the smaller companies. One Up On Wall Street bt Peter Lynch with John Rothchild.

Pg 114: Each company selected should be large, prominent, and conservatively financed. Indefinite as these adjectives must be, their general sense is clear. Observations on this point are added at the end of the chapter. The Intelligent Investor by Benjamin Graham updated with new commentary by Jason Zweig.

Pg 92: In 1981 Rolf Banz, a graduate student at the University of Chicago, investigated the returns on stocks using the database provided by the Center for the Research in Security Prices (CRSP). He found that small stocks systematically outperformed large stocks, even after adjusting for risk within the framework of the capital asset pricing models. Stocks for the Long Run by Jeremy J Siegel, McGraw Hill.

The stock's 'floating supply' is also frequently considered by market professionals. It measures the number of common shares left for possible purchase after subtracting the quantity of stock that is closely held by company management. Stocks that have a large percentage of ownership by top management are generally your best prospects. How to Make Money in Stocks by William J O'Neil, McGraw Hill, pg. 30.

Pg 163-64: We eat our own cooking in line with Berkshire's owner orientation. Most of our directors have a major portion of their net worth invested in the company we can guarantee that your financial fortunes will move in lockstep with ours for whatever period of time you elect to be our partner. Beyond by Bruce Greenwald, Judd Kahn, Paul Sonkin, Michael van Biema, Wiley.

Pg 154: Okumus's bread-and-butter trade is buying a stock with sound fundamentals at a bargain price. He looks for stocks with good growth in earnings, revenues, and cash flow, and significant insider buying or ownership. Strong fundamentals, however, are only half the picture. A stock must also be very attractively priced. Typically, the stocks Okumus buys have declined 60 percent or more off their highs and are trading at price/earnings ratios under 12. He also prefers to buy stocks with prices as close as possible to book value. Out of the universe of ten thousand stocks Okumus surveys; he holds only ten in his portfolio at any given time. Stock Market Wizards by Jack D. Schwager.

The Net Tangible Assets represent the total assets less liabilities less intangible assets of a company. Intangible assets like goodwill, brand names, mast heads etc are excluded because it is difficult to estimate a market value of these. The NTA of a share is Net Tangible Assets per share. The Price to NTA figure is a pointer to the attractiveness in value of a share represented by the net tangible assets, ignoring its earning potential as a going concern. A figure of less than 1 is a buy tip suggesting the market is valuing it at less than the realizable value of its assets. Benjamin Graham was well known for using this figure in selecting his stocks for buying.

Pg 165: Book value is equal to the capital that has gone into a business, plus whatever profits have been retained. An investor is concerned with how much can be taken out in the future; that is what determines a company's 'worth' (or its 'intrinsic value' as Buffett would say) book value is blind to intangibles such as brand name.

Buffett: The Making of an American Capitalist by Roger Lowenstein, Doubleday.

Pg 198: Net asset value, book value, balance-sheet value, and tangible-asset value are all synonyms for net worth, or the total value of a company's physical and financial assets minus all its liabilities. It can be calculated using the balance sheets in a company's annual and quarterly reports; from total shareholders' equity, subtract all soft assets such as goodwill, trademarks, and other intangibles. Divide by the fully diluted number of shares outstanding to arrive at book value per share.

Pg 199: If he is to pay some special attention to the selection of his portfolio, it might be best for him to concentrate on issues selling at a reasonably close approximation to their tangible - asset value - say, at not more than one-third above that figure. The Intelligent Investor by Benjamin Graham updated with new commentary by Jason Zweig.

Pg 154: Okumus's bread-and-butter trade is buying a stock with sound fundamentals at a bargain price. He looks for stocks with good growth in earnings, revenues, and cash flow, and significant insider buying or ownership. Strong fundamentals, however, are only half the picture. A stock must also be very attractively priced. Typically, the stocks Okumus buys have declined 60 percent or more off their highs and are trading at price/earnings ratios under 12. He also prefers to buy stocks with prices as close as possible to book value. Out of the universe of ten thousand stocks Okumus surveys; he holds only ten in his portfolio at any given time.

Stock Market Wizards by Jack D. Schwager.

Pg 97: We suggest rather forcibly that the book value deserves at least a fleeting glance by the public before it buys or sell shares in a business undertaking. Let the stock buyer, if he lays any claim to intelligence, at least be able to tell himself, first, how much he is actually paying for the business, and secondly, what he is actually getting for his money in terms of tangible resources. (Graham and Dodd, Security Analysis, 1934 edition, pp. 493-94.)

Pg 98: Stocks that exhibit low price-to-book and low price-to-earnings ratios are often called value stocks. Historical returns on value stocks have surpassed growth stocks, and this outperformance was especially true among smaller stocks: the smallest value stocks returned 19.51 percent per year, the highest of any of the 25 categories analyzed, with the smallest growth stocks returned only 6.67 percent, the lowest of any category.

Stocks for the Long Run by Jeremy J Siegel, McGraw Hill.

Pg 301: Whereas bond rates are fixed, earnings typically grow. Consider the example of (the Swedish company FANDU). If its current annual EPS is $3 and the stock is trading for $111 per

share the P/E is $111 divided by $3 or 37. (Conversely the current Earnings Yield in percent is 100/37 or 2.7 %.). Imagine that FANDU is expected to increase earnings 10% per year. If so, in 10 years its EPS should grow to $7.78. Assuming we bought shares when they were at $111, the earnings yield for us has now become 7%, considerably better ($7.78 divided by $111 is 0.07, or 7%). It can be instructive to see how long it takes for the growing earnings yield to pass the current 30-years bond rate. FANDU passes it within nine years. If your desired rate of return on your invested dollars is 15%, it will take FANDU 18 years to reach that target if earnings actually grow at the estimated pace, that is. Perhaps you can find another investment that will get you there more quickly. With riskier companies, you might look for them to pass your target rate sooner rather than later. The Motley Fool Money Guide by Selena Maranjian foreword Gardner. The Motley Fool, Inc.

Pg 79: Since earnings are the ultimate source of value, the earnings yield, which is the reciprocal of the price-earnings (or P-E) ratio, should be the best long-term guide to the real return that the market provides shareholders. This is because earnings are derived from real assets that in the long run will appreciate with inflation.

Pg 80: For the last 50 years, the 6.96 percent median earnings yield almost matches the 7.13 percent real stock return. Stocks for the Long Run by Jeremy J Siegel, McGraw Hill.

EBIT Margins are the Earnings Before Interest and Tax divided by sales. EBIT Margins reflect a company's cost efficiency. An increase in EBIT Margins suggests cost reductions.

Pg 34-36: Does the company have a worthwhile profit margin? the first step in examining profits is to study a company's profit margin. what is the company doing to improve or maintain profit margin? Common Stocks and Uncommon Profits by Philip A Fisher, Wiley Investment Classics.

Pg 132: I'd rather have a $10 million business making 15 percent than a $100 million business making 5 percent. Buffett: The Making of an American Capitalist by Roger Lowenstein, Doubleday.

Pg 218: If the company's costs increase 4 percent, it can raise prices 6 percent, adding 2 percent to its profit margin. This may not seem like much, but if your profit margin is 10 percent (about what Philip Morris's is) a 2-percentage-point rise in the profit margin means a 20 percent gain in earnings. If you find a business that can get away with raising prices year after year without losing customers, you've got a terrific investment.

Pg 220: In a survey I once saw, college students and other young adults were asked to guess the average profit margin on the corporate dollar. Most guessed 20-40 percent. In the last few decades the actual answer has been closer to 5 percent. There's not much to be gained in comparing pretax profit margins across industries, since the generic numbers vary so widely. Where it comes in handy is in comparing companies within the same industry.

Pg 221: because on the upswing, as business improves, the companies with the lowest profit margins are the biggest beneficiaries. What you want, then, is a relatively high profit-margin in a long-term stock that you plan to hold through good times and bad, and a relatively low profit-margin in a successful turnaround. One Up On Wall Street by Peter Lynch with John Rothchild, Penguin.

Guru Acknowledgements xxx: Peter Schliemann founded private money manager Rutabaga Capital Management. A value manager, Schliemann looks for unloved, underfollowed companies in run-of-the-mill businesses that are going through a rough patch. Schliemann believes in the regression to the mean concept, and seeks out companies with below normal profit margins. He focuses on return on capital as a profitability measure, and seeks out firms with the biggest difference between ROC and cost of capital. Schliemann looks for positive cash flow.

Guru Acknowledgements xxxi: Ken Shea is director of equity research at Standard & Poors. Shea looks for companies with low margins that can improve, and sees slowing revenue growth, as well as big nonrecurring charges, as red flags.

Guru Acknowledgements xxxii: Nancy Tengler is president and chief executive officer of Fremont Investment Advisors, San Francisco, California, and co-portfolio manager of Fremont's New Era Value Fund For instance, she prefers stocks with analyst coverage and strong operating margins. Tengler's favored valuation ratio is price/sales ratio, not by itself, but compared to the S&P's price/sales ratio, which she calls the relative price/sales ratio. She compares her relative price/sales ratio to historical values and uses it as her primary buy/sell signal.

Guru Acknowledgements xxxii: Thatcher Thomson is a Merrill Lynch analyst specializing in the business services sector. Factors he considers important are revenue visibility, a company's position vis a vis the competition, sales growth and earnings growth, margins, cash flow versus net income, and low debt. Thompson's red flags include negative earnings surprises and/or reduction in guidance, departure of the CFO, growth by acquisition combined with declining margins, or declining cash flow combined with rising receivables. Gross margin or Gross profit is the difference between Net Sales and Cost of Goods Sold. Financial Accounting by Libby, Libby and Short, Irwin/McGraw-Hill.

Some analysts believe interest cover represented by EBIT/I should exceed 3 to provide a suitable cushion against adversity. A business downturn could lead to a decline in EBIT and a rise in interest rates could lead to a rise in interest costs. Both these factors acting in conjunction should not result in the company's inability to meet its interest obligation.

Pg 111-112: Rule 3: A rational (and risk-averse) investor should be willing to pay a higher price for a share, other things being equal, the less risky the company's stock.

Rule 4: A rational (and risk-averse) investor should be willing to pay a higher price for a share, other things being equal, the lower are interest rates. A Random Walk down Wall Street by Burton G Malkiel, Norton.

This figure is a useful indicator in assessing the dollar value of sales for each dollar worth of sales of the company. Like all other indicators with Price in the numerator, the lower the ratio the better the value it represents. The growth potential of sales should also be considered.

Pg 61-62: A caveat regarding P/Es is that a stock can have a very high P/E because the company is reporting no or little earnings, but may qualify for purchase if there is a sound reason to believe future earnings will be higher. In this case, investors look at other criteria including the price-to-sales ratio (P/S), a ratio used by value investors in more recent years. The P/S relates the stock price to sales per share. The P/S varies from industry to industry, but generally a stock selling with a P/S of under one would be considered attractive. Graham and His Followers Apply the 3 Steps. Lessons From The Legends of Wall Street.

Pg 19: Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years? Common Stocks and Uncommon Profits by Philip A Fisher, Wiley Investment Classics.

Guru Acknowledgements xxvii: John Buckingham is president and chief portfolio manger of money manager Al Frank Asset Management, and editor of the Prudent Speculator newsletter. Buckingham follows classic investment strategies, buying underpriced firms with long-term track records and holding them as long as it takes. He prefers firms with plenty of cash in the bank, strong cash flow, and low debt. Buckingham favors the price/sales ratio to measure value.

Guru Acknowledgements xxxii: Nancy Tengler is president and chief executive officer of Fremont Investment Advisors, San Francisco, California and co-portfolio manager of Fremont's New Era Value Fund For instance, she prefers stocks with analyst coverage and strong operating margins. Tengler's favored valuation ratio is price/sales ratio, not by itself, but compared to the S&P's price/sales ratio, which she calls the relative price/sales ratio. She compares her relative price/sales ratio to historical values and uses it as her primary buy/sell signal. Fire Your Stock Analyst! Analysing Stocks On Your Own by Harry Domash.

Pg 125: The most basic ratio of all is the P/S ratio, which is the current price of the stock divided by sales per share. The nice thing about the P/S ratio is that sales are typically cleaner than reported earnings because companies that use accounting tricks usually seek to boost earnings. In addition, sales are not as volatile as earnings - one time charges can depress earnings temporarily, and the bottom line of economically cyclical companies can vary significantly from year to year. The relative smoothness of sales makes the P/S ratio useful for quickly making comparisons with highly variable earnings – by comparing the P/S ratio with historical P/S ratios. Retailers, which typically have very low net margins - tend to have very low P/S ratios. The average grocery store, for example, had a P/S ratio of 0.4 in mid-2003, whereas the average medical device firm had a P/S ratio of around 4.3.The reason was that the average grocery store had a net margin of 2.5% whereas the average medical device firm had a net margin of 11%. The Five Rules for Successful Stock Investing by Pat Dorsey, Director of Stocks Analysis, Morningstor, Wiley.

The average equity figure is used in the denominator. This is the opening balance of shareholders funds plus the closing balance divided by two.

Net ROE = Net Income/Sales x Sales/Assets x Assets/Equity.

To compute an Industry Average ROE the ROE of each stock in the industry is weighted by its market capitalization. Benjamin Graham looked for high return on equity. Over the thirty year period 1945-75 the Return on Equity for most U.S. businesses including the Dow Jones Industrials averaged 10 to 12%.

Pg 137: Writing to the investors, Buffett used the same yardstick as he had in private the return on equity capital- that is, the percentage profit on each dollar invested. Buffett was extremely consistent about such things.

Buffett: The Making of an American Capitalist by Roger Lowenstein, Doubleday.

Pg 95: The test of economic performance, he believes, is whether a company achieves a high earnings rate on equity capital (without undue leverage, accounting gimmickry, etc.) not whether it has consistent gains in earnings per share. To measure a company's annual performance, Buffett prefers return on equity- the ratio of operating earnings to shareholders' equity. The Essential Buffett by Robert G Haagstrom, John Wiley & Sons, Inc.

Pg 80: America's Forbes Magazine has often used this criterion for selecting the world's best 100 small companies. The criterion used by them is current year's ROE above 10% and average ROE for the last 5 years to be above 10%. the sum of the dividend yield and the growth rate of real per-share earnings has approximated the real rate of return on equity. Stocks for the Long Run by Jeremy J Siegel, McGraw Hill.

Guru Acknowledgements xxix: Nicholas Gerber is manager and founder of the Ameristock Fund. Gerber uses return on equity to measure profitability, but double checks it by requiring book value to grow at the same rate.

Fire Your Stock Analyst! Analysing Stocks On Your Own by Harry Domash.

Pg 29:If you are choosing between two stocks to buy, one with 10 million shares outstanding and the other with 60 million, the smaller one will usually be the rip-roaring performer if other factors are equal.

Pg 33: Stocks with a small or reasonable number of shares outstanding will, other things being equal, usually outperform older, large capitalization companies.

How to Make Money in Stocks by William J O'Neil, McGraw Hill.

Pg 246-247: Fixed interval of time. For each new trading day, the oldest price is dropped and the most recent price is added to compute the average. Moving averages fluctuate far less than daily prices. When prices are rising the moving average trails the market and, technical analysts claim, forms a support level for stock prices. When prices are falling, the moving average is above current prices and forms a resistance level. Analysts claim that a moving average allows investors to identify the basic market trend without being distracted by the day-to-day volatility of the market. When prices penetrate the moving average, this indicates that powerful underlying forces are signaling a reversal of the basic trend. One of the early supporters of this strategy was William Gordon, who indicated that, over the period from 1897 to 1967, buying stocks when the Dow broke above the moving average produced nearly seven times the return as buying when the Dow broke below the average. (William Gordon, The Stock Market Indicators, Palisades, NJ: Investors Press, 1968). Whenever the Dow Jones Industrial Average closed at least 1 percent above it. 200-day moving average, stocks were purchased at least 1 percent below its 200-day moving average, stocks were sold.

Pg 249: Over the entire 107-year history of the Dow Jones average, the 200-day moving average strategy had its greatest triumph during the boom and crash of the 1920s and early 1030s. Investors following the 200-day moving average strategy would also have avoided the October 19, 1987 crash, selling out on the previous Friday, October 16 From 1885 through June 1997, the 11.51 percent annualized return from the timing strategy beat the return on the holding strategy return of 9.8 percent per year. The major gain of the timing strategy is a reduction in risk. This means that on a risk-adjusted basis the return on the 200-day moving average strategy is quite impressive.

Pg 252: A moving average is simply the arithmetic average of a given number of past closing prices of a stock or index over a fixed interval of time Recent econometric research has shown that simple trading rules as 200-day moving averages can be used to improve returns But this strategy should be monitored closely In October 1987, the Dow fell below its 200-day moving average on the Friday before the crash and gave a sell signal. But if you failed to get through to your broker that Friday afternoon, you would have been swept downward in the 22 percent nightmare of Black Monday. Stocks for the Long Run by Jeremy J Siegel, McGraw Hill.

Pg 13-14: Over the years I've found that a 30-week moving average (MA) is the best one for long-term investors, while the 10-week MA is best for traders to use. A 30-week MA is simply the closing price for this Friday night added to the prior 29 Friday weekly closings. Divide that figure by 30 and the answer is what's plotted on this week's chart. Stocks trading beneath their 30-week Mass should never be considered for purchase, especially if MA is declining. Stocks trading above their 30-week Mass should never be considered for short-selling, especially if the MA is rising. For a long-term investor, the ideal time to buy a stock is when it breaks out above resistance and also moves above its 30-week MA, which must no longer be declining. For a trader, who wants action, the ideal time to buy a stock is when it's already above its 30-week MA, when the MA is rising. Stan Weinstein's Secrets for Profiting in Bull and Bear Markets, McGraw Hill.

Pg 106: Some stocks can be sold when they are 70% to 100% above their 200-day moving average price line. (MAP decreasing) After a prolonged upswing, if a stock's 200-day moving average line of its price turns into a downtrend, consider selling the stock. How to Make Money in Stocks by William J. O'Neil.

Pg 25: A stock making the new high list for the first time during a bull market and accompanied by a big increase in trading volume might be a red-hot prospect worth checking into.

Pg. 98: Only a fool holds out for the top dollar, said Joe Kennedy one-time Wall Street speculator and the father of former President John F Kennedy. How to Make Money in Stocks by William J O'Neil, McGraw Hill. Avoid the temptation to buy when stocks are high and sell when stocks are low. Winning the Loser's Game Timeless Strategies for Successful Investing by Charles D Ellis, McGraw Hill, pg. 103 I will tell you the secret of getting rich on Wall Street You try to be greedy when others are fearful and try to be very fearful when others are greedy.

Buffett: The Making of an American Capitalist by Roger Lowenstein, Doubleday, pg. 50

Pg 102: Most investors, being all too human, much prefer stock markets that have been rising and feel most enthusiastic about buying more shares when stock prices are already high-causing the future rate of return from their dividends to be axiomatically low. (The dollars of dividends to be received will be the same per share of stock whether you pay a lot or a little for the shares.) Winning The Loser's Game Timeless Strategies for Successful Investing by Charles D Ellis, McGraw Hill.

Pg 25: The hard-to-access great paradox in the stock market is that what seems too high and risky to the majority usually goes higher and what seems low and cheap usually goes lower. How to Make Money in Stocks by William J. O'Neil.

Pg 66: Run a short-only portfolio.

Pg 67: When a chart breaks out to a new high, unless I have some really compelling information, I just get out of the way. I am only concerned about stocks making new all-time highs. Stock Market Wizards by Jack D. Schwager.

Pg 5: Decisive investors should be out of a stock long before it appears on the new-low list. How to Make Money in Stocks by William J O'Neil, McGraw Hill.

Pg 103: Avoid the temptation to buy when stocks are high and sell when stocks are low. Winning the Loser's Game Timeless Strategies for Successful Investing by Charles D Ellis, McGraw Hill.

Pg 50: I will tell you the secret of getting rich on Wall Street You try to be greedy when others are fearful and try to be very fearful when others are greedy. Buffett: The Making of an American Capitalist by Roger Lowenstein, Doubleday.

Pg 61: Our long-term interests are best served by lower stock price. Who among us would close our pocketbooks and turn away from the store that puts its most attractive wares on sale at 10,20, even 30 percent off its recent prices? None of us would say, I don't want to buy these things when they're on sale; I'll wait until the price goes back up and buy then. But that's exactly how we behave toward investments. When the market drops-putting stocks on sale - we stop buying (in fact, we'll even sell in a picnic). And when the market rises, we buy more and more enthusiastically. As Jason Zweig puts it, If we shopped for stocks the way we shop for socks, we'd be better off. We are wrong when we feel good about stocks having gone up, and we are wrong when we feel bad about stocks having gone down. A falling stock market is the necessary first step to buying low.

Pg 102: Most Investors feel quite negatively about stocks after share prices have gone down and are most tempted to sell out at the wrong time-when prices are already low-and the future dividend yield on the price paid would be high. Winning The Loser's Game Timeless Strategies for Successful Investing by Charles D Ellis, McGraw Hill.

Pg 40: A low price and the prospect for imminent change are the two key components. Beyond that, it also helps if there is insider buying by management, which confirms prospects for an improvement in the company outlook. Stock Market Wizards by Jack D. Schwager.

Pg 45: Active investors typically think of risk in four different ways. One is price risk: You can lose money by buying stock at too high a price, and if you think a stock might be high, you know you are taking some price risk. Another type of risk is called interest rate risk: If interest rates go up-to offset a change in expectations for inflation-more than is now expected (and already discounted in the market), your stocks will go down. You'll know you were taking risk. Winning The Loser's Game Timeless Strategies for Successful Investing by Charles D. Ellis.

Pg 25: An analysis was made of the daily newspapers' new-high and new-low stock lists. Our findings were simple. Stocks on the new-high list tended to go higher, and those on the new-low list tended to go lower. A stock making the new-high list the first time during a bull market and accompanied by a big increase in trading volume might be a red-hot prospect worth checking into. Decisive investors should be out of a stock long before it appears on the new-low list.

Pg 104: New highs on decreased or poor volume means there is temporarily no demand for the stock at that level and selling may soon overcome the stock. How to Make Money in Stocks by Wlliam J. O'Neil.

Pg 113: While these two advantages have been of major importance - and have given common stocks a far better record than bonds over the long-term past we have consistently warned that these benefits could be lost by the stock buyer if he pays too high a price for his shares. Why do the high prices of stocks affect their dividend yields? A stock's yield is the ratio of its cash dividend to the price of one share of common stock. If a company pays a $2 annual dividend when its stock price is $100 per share, its yield is 2%. But if the stock price doubles while the dividend stays constant, the dividend yield will drop to 1%. The Intelligent Investor by Benjamin Graham updated with new commentary by Jason Zweig.

Pg 141: If I could avoid a single stock, it would be the hottest stock in the hottest industry, the one that gets the most favorable publicity, the one that every investor hears about in the car pool or on the commuter train and succumbing to the social pressure, often buys. Hot stocks can go up fast, usually out of sight of any of the known landmarks of value, but since there's nothing but hope and thin air to support them, they fall just as quickly. If you aren't clever at selling hot stocks (and the fact that you've bought them is a clue that you won't be), you'll soon see your profits turn into losses, because when the price falls, it's not going to fall slowly, nor is it likely to stop at the level where you jumped on. One Up On Wall Street by Peter Lynch with John Rothchild, Penguin.

Pg 25: The hard-to-accept great paradox in the stock market is that what seems too high and risky to the majority usually goes higher and what seems low and cheap usually goes lower.

Pg 35-36: If the stock's relative price strength, on a scale from 1 to 99, is below 70, it's lagging the better-performing stocks in the overall market. That doesn't mean it can't go up in price. It just means if it goes up, it will rise a mere inconsequential amount. A relative strength of 70, for example means a stock outperformed 70% of the stocks in the comparison group during a given period, say, the last six or twelve months. The 500 best-performing listed equities for each year from 1953 through 1983 averaged a relative price strength rating of 87 just before their major increase in price actually began. Look for the genuine leaders! you should consider restricting your buys to companies showing a relative strength rank of 80 or higher If a relative price strength line has been sinking for seven months or more, or if the line has an abnormally sharp decline for four months or more, the stock's behavior is questionable.

Pg 106: Poor relative price strength can be a reason for selling. Consider selling when a stock's relative strength on a scale from 1 to 99 drops below 70. How to Make Money in Stocks by William J O'Neil, McGraw Hill. Since at least the 1990's academic studies started showing that stocks that had risen the most over a six-month period, on average, outperformed the market for an additional 6 to 12 months- and that stocks whose prices had declined the most tended to continue lagging behind. Why the Market Winners Tend to Keep Winning by Mark Hulbert, New York Times, May 4, 2003.

Guru Acknowledgements xxx: The highest scoring Q-Rank companies show strong relative strength, recent positive earnings surprises, and strong and accelerating earnings growth. Collins looks to the stock charts, specifically weakening relative strength, for his sell signals. He also considers high valuations compared to the company's own historical values as a red flag. Fire Your Stock Analyst! Analysing Stocks On Your Own by Harry Domash.

The turnover rate (the total shares sold in a year divided by the total number of shares) for New York Stock Exchange stocks nearly doubled between 1982 and 1999, from 42% to 78%. The New York Stock Exchange Fact Book 1998 (www.nyse.com).

Pg 39: The NASDAQ market, which emphasizes high-technology stocks, shows an even greater turnover rate increase; from 88% in 1990 to 221% in 1999 another reason for the rising turnover rate in the stock market is the declining cost of making a trade. Irrational Exuberance by Robert J. Shiller, Broadway Books, New York. Given two stocks whose prices have been rising, momentum investors should pick the one in which there has been less trading, as suggested by the ratio of trading volume to shares outstanding. Why the Market Winners Tend to Keep Winning by Mark Hulbert, New York Times, May 4, 2003.

Pg 37: In 1973, when Graham last revised The Intelligent Investors, the annual turnover rate on the New York Stock Exchange was 20%, meanings that the typical shareholder held a stock for five years before selling it. By 2002, the turnover rate had hit 105%-a holding period of only 11.4 months. Back in 1973, the average mutual fund held on to a stock for nearly three years; by 2002, that ownership period had shrunk to just 10.9 months. And by 1999, Fidelity's discount brokerage division was egging on its clients to trade anywhere, anytime, using a Palm handheld computer - which was perfectly in tune with the firm's new slogan, Every second counts. The Intelligent Investor by Benjamin Graham updated with new commentary by Jason Zweig.

Investors prefer low volatility and consider low volatility synonymous with low risk. In a 1988 letter to shareholders Warren Buffett said: “We do not want to maximize the price at which Berkshire shares trade. We wish for them to trade in a narrow range centered at intrinsic business value. However, traders and speculators prefer high volatility because it creates opportunities for buying and selling over shorter time frames.

Pg 307: In a world with excess volatility, investors care about the directions of security price fluctuations. Price declines might provide buying opportunities to sell. Under some circumstances, following a significant decline in price, an asset actually becomes less risky, since it can be acquired more cheaply. The common-sense conclusion of bottom-fishing investors contrasts with the stastician's conclusion that a dramatic drop in price increases observed (historical) volatility, implying a higher risk level for the assets. Volatility creates opportunity only when prices change more than necessary to reflect changes in underlying fundamentals. Pioneering Portfolio Management, an Unconditional Approach to Institutional Investment by David F. Swensen foreword by Charles D. Ellis.

Guru Acknowledgements xxx: Louis Navellier, founder and president of the firm bearing his name, publishes several newsletters, runs mutual funds, and manages money. Navellier selects stocks by first running a screen that compares stock performance to volatility, and then picks the fundamentally strongest from that list. Fire Your Stock Analyst! Analysing Stocks On Your Own by Harry Domash.

Present Value of Euro1,000 invested, plus capital gain plus dividends reinvested.

Pg 112-113: The argument we made for common stocks in 1949 turned on two main points. The first was that they had offered a considerable degree of protection against the erosion of the investor's dollar caused by inflation, whereas bonds offered no protection at all. The second advantage of common stocks lay in their higher average return to investors over the years. This was produced both by an average dividend income exceeding the yield on good bonds and by an underlying tendency for market value to increase over the years in consequence of the reinvestment of undisturbed profits. According to professors Elroy Dimson, Paul Marsh, and Mike Staunton of London Business School, if you had invested $1 in U.S. stocks in 1900 and spent all your dividends, your stock portfolio would have grown to $198 by 2000. But if you had reinvested all your dividends, your stock portfolio would have been worth $16,797! Far from being an afterthought, dividends are the greatest force in stock investing. The Intelligent Investor by Benjamin Graham updated with new commentary by Jason Zweig.

This is an important measure used to assess a company's growth potential. It is important to consider growth in earnings per share rather than growth in earnings per se. Earnings may also be increased by increasing the equity capital base (through issue of new shares).

Pg 258: Any company that has a complex capital structure (that is debt or equity securities convertible into common stock) must also compute the effect of these items as if they had been converted at the beginning of the period, or when initially issued if during the current reporting period (called Diluted EPS). Financial Accounting by Libby, Libby and Short, Irwin/McGraw-Hill.

Pg 154: Okumus's bread-and-butter trade is buying a stock with sound fundamentals at a bargain price. He looks for stocks with good growth in earnings, revenues, and cash flow, and significant insider buying or ownership. Strong fundamentals, however, are only half the picture. A stock must also be very attractively priced. Typically, the stocks Okumus buys have declined 60 percent or more off their highs and are trading at price/earnings ratios under 12. He also prefers to buy stocks with prices as close as possible to book value. Out of the universe of ten thousand stocks Okumus surveys; he holds only ten in his portfolio at any given time. Stock Market Wizards by Jack D. Schwager.

Pg 80: I have shown that the real return on equity, the sum of the dividend yield, and price appreciation has averaged about 7.0 percent over long periods of time. For the 2 percent dividend yield prevailing in the late 1990s, this means that real share prices must appreciate at 5 percent per year to maintain. Stocks for the Long Run by Jeremy J Siegel, McGraw Hill.

Pg 154: Okumus's bread-and-butter trade is buying a stock with sound fundamentals at a bargain price. He looks for stocks with good growth in earnings, revenues, and cash flow, and significant insider buying or ownership. Strong fundamentals, however, are only half the picture. A stock must also be very attractively priced. Typically, the stocks Okumus buys have declined 60 percent or more off their highs and are trading at price/earnings ratios under 12. He also prefers to buy stocks with prices as close as possible to book value. Out of the universe of ten thousand stocks Okumus surveys; he holds only ten in his portfolio at any given time. Stock Market Wizards by Jack D. Schwager.

Guru Acknowledgements xxvii: John Buckingham is president and chief portfolio manger of money manager Al Frank Asset Management, and editor of the Prudent Speculator newsletter. Buckingham follows classic investment strategies, buying underpriced firms with long-term track records and holding them as long as it takes. He prefers firms with plenty of cash in the bank, strong cash flow, and low debt. Buckingham favors the price/sales ratio to measure value.

Guru Acknowledgements xxix: David Edwards is president and primary portfolio manager of private money management firm Heron Capital Management. Edwards prefers firms with strong operating cash flow, and high return on equity. He believes that for proper diversification, portfolios should contain a least 32 stocks, with no more than 25 percent in any one sector.

Guru Acknowledgements xxx: Peter Schliemann founded private money manager Rutabaga Capital Management. A value manager, Schliemann looks for unloved, under followed companies in run-of-the-mill businesses that are going through a rough patch. Schliemann believes in the regression to the mean concept, and seeks out companies with below normal profit margins. He focuses on return on capital as a profitability measure, and seeks out firms with the biggest difference between ROC and cost of capital. Schliemann looks for positive cash flow.

This figure reflects the growth in sales per share and is a useful measure to assess growth. A more useful measure is growth in earnings per share because mere growth in sales per share accompanied by declining profit margins is of little use to shareholders.

Guru Acknowledgements xxxi: Ken Shea is director of equity research at Standard & Poors. Shea looks for companies with low margins that can improve, and sees slowing revenue growth, as well as big nonrecurring charges, as red flags.

Guru Acknowledgements xxxii: Thatcher Thomson is a Merrill Lynch analyst in New York specializing in the business services sector. Factors he considers important are revenue visibility, a company's position vis a vis the competition, sales growth and earnings growth, margins, cash flow versus net income, and low debt. Thompson's red flags include negative earnings surprises and/or reduction in guidance, departure of the CFO, growth by acquisition combined with declining margins, or declining cash flow combined with rising receivables. Fire Your Stock Analyst! Analysing Stocks On Your Own by Harry Domash.

Famous Quotes on Selling

Pg 686: Sell out such purchases when a price is reached substantially above normal value, say 1/8 higher, or from 20% to 50% higher on a scale basis. Security Analysis The Classic 1940 Second Edition by Benjamin Graham and David Dodd, McGraw Hill.

Pg 91: Limit your losses to 7% or 8% of your cost I am talking about cutting your loss when it is 7% or 8% below the price you paid Bill Astrop, president of Astrop Avisory Corporation in Atlanta, Georgia, suggests individual investors should sell half of their position in a stock if it is down 5% from their cost and the other half once it is down 10% below the price paid. How to Make Money in Stocks by William J O'Neil, McGraw Hill.

Pg 37: If you own a portfolio of equities, you must learn to sell your worst performing stocks first and keep your best-acting investments a little longer...Of course, a stock sliding 35% to 40% in a general market decline of 10% could be flashing you a warning signal, and you should, in many cases, steer clear of such an uncertain actor. How to Make Money in Stocks by William J O'Neil, McGraw Hill. The worst investments are those where you tie up your money for a long time that you could have been using better someplace else. Warren Buffett on Liquidity. Flawed perceptions cause changes in future events. So if you want to detect a future event you need to detect flawed perceptions.

Pg 49: There is a two-way connection between flawed perception and the actual course of events I call this two-way connection 'reflexivity' two-way feedback between perception and reality what Soros called reflexivity formed the key to his theory The 'bias' of investors toward a stock whether positive or negative, causes the price to rise or fall.

Pg 50: He looks for opportunities in reflexivity. Sometimes the divergence between a participant's thinking and the actual state of affairs is large and not self correcting this situation he termed far- from-equilibrium. This situation was unstable and of extreme interest to Soros. The gap between perception and reality was wide because events were running out of control boom/bust sequences in the financial markets manias, processes which are initially self-reinforcing but unsustainable and therefore eventually have to be reversed.

Pg 52: And markets that feed on their own frenzy always overreact, always go to the extremes. That overreaction-pushing toward the extremes-causes a boom/bust sequence.

Pg 53: the important thing is to recognize the inevitability of a trend change. The key point is the identification of the inflection point.

Pg 54: According to Soros's theory of reflexivity, collapse becomes inevitable.

Pg 66: He always rethinks a position. You always have to rethink it and rethink it and rethink it. Things change. The prices change. Conditions change. It was up to you as a fund manager to constantly rethink your position.

Pg 83: He would know exactly why he should or shouldn't buy. The other great ability George has is that when he finds he's in the wrong situation, he'll get out. Soros ;The Life, Times & Trading Secrets of the World's Greatest Investor by Robert Slater.

Pg 21: Realistically-without taking above-average market risk-to outperform the equity market by even one half of 1 percent consistently would be a great success which almost no sizable investment managers have achieved for very long.

Pg 33: Time transforms certain investments from least attractive to most attractive - and vice versa.

Pg 39: The average long-term experience is never surprising, but the short-term experience is always surprising.

Pg 43: When asked what he considered man's most powerful discovery, Albert Einstein replied without hesitation: Compound interest.

Pg 56: The great secret for success in long-term investing is to avoid serious losses.

Pg 85: Never risk more than you know you can afford to lose.

Famous Quotes of Warren Buffett:

On When to Buy Shares: A great investment opportunity occurs when a marvelous business encounters a onetime huge but solvable problem.

On The Two Biggest Rules of Investing:

Rule No.1: Never lose money.

Rule No.2: Never forget Rule No.1.

On Having Margin for Error

This is the cornerstone of our investment philosophy: Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results. On Taking Your Time An investor should act as though he had a lifetime decision card with just twenty punches on it. With every investment decision his card is punched, and he has one fewer available for the rest of his life.

Warren Buffet Quotes on Buying On Ideas All I want is one good idea every year. If you really push me, I will settle for one good idea every two years. On Choosing Investments It's like when you marry a girl. It is her eyes? Her personality? It's a whole bunch of things you can't separate. On Ideal Companies Good businesses are the ones that in some way are reasonably sheltered from competition, that gets to having what I call a franchise of some sort. On Opportunities Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised. On Advice for Someone Entering The Investment Field

Buffet: If he were coming in with small sums of capital, I'd tell him to do exactly what I did forty-odd years ago, which is to learn about every company in the United States that has publicly traded securities and that bank of knowledge will do him or her terrific good over time.

Smith: But there's twenty-seven thousand public companies.

Buffet: Well, start with the A's.

On the Ideal Investor Personality The most important quality for an investor is temperament, not intellect. You don't need tons of IQ in this business. You don't have to be able to play three-dimensional chess or duplicate bridge. You need a temperament that derives great pleasure neither from being with the crowd nor against the crowd. You know you're right, not because of the position of others but because your facts and reasoning are right. On Other People's Opinions One piece of advice I got at Columbia from Ben Graham that I've never forgotten: You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right. That's the only thing that makes you right. On Predicting Markets The fact that people will be full of greed, fear, or folly is predictable. The sequence is not predicable Buffett explained in one of his letters Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results. Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised.

On Having Margin for Error

This is the cornerstone of our investment philosophy: Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.

Quotes on Buying at Low Prices

From AFR article by Michael Kahn (reproduced from Barron's) dated Sep 27,2002: Simply put, price is the bottom line so it makes sense to start any analysis with it construct a case to buy or sell stocks they need more tools to examine factors such as volume - arguably the most important element after price. Volume, as the market's fuel, can be critical in validating price moves. If volume is low, there won't be enough demand to push stocks higher or enough supply to drag them lower for any sustained period. The market is like a rocket ship and volume is its fuel with enough fuel it not only overcomes gravity to start rising but actually accelerates as it ascends. If its fuel runs low, it starts to slow Volume Signals for the Technicians:

Page 6: You don't have to be Sherlock Holmes to know that something is up in stock XYZ if it has traded an average of 20,000 to 30,000 shares each week suddenly, it breaks out above its ceiling, or what we technicians call resistance on huge volume (say 250,000 to 300,000 shares for the week) Even more importantly you'll see why you should have called your broker with buy orders.

Page 10: Never buy a stock in a downtrend on the chart Always be consistent.

Page 13: When a stock is in an uptrend, the buying army is obviously stronger than the selling side and rising prices result. A downtrend is the flip side of the coin, where the selling side is much more powerful than the buyers.

Page 25: It's a favorable signal when volume expands as a stock rises and decreases as a stock declines it's very important that volume is large and expanding on a breakout. Heavy volume signals urgent and powerful buying that will propel the stock much higher.

Pages 60-61: Now let's look at a real life example. Mexico Fund broke out at 3 1/4 Volume started to increase as the stock promptly jumped 35 percent in a matter of days. Once the initial burst of buying had run its course, it temporarily peaked at 4 1/8. Two weeks later, it pulled back to 3 3/8 - very close to the initial breakout. Volume favorably contracted on the pullback, so then when you should have bought your remaining half of the position. Thereafter volume increased sharply as it gathered momentum and in the next nine months chalked up a fast 330 percent gain as it rallied to 14.

Page 103: a quick perusal of any chart book would convince you that volume confirmation on a breakout is crucial Volume is a gauge of how powerful the buyers are. As I said earlier, stocks can fall of their own weight, but to advance it takes plenty of buying power. It's no different from pushing a boulder up a hill Never trust a breakout that isn't accompanied by a significant increase in volume volume should pick up significantly on the breakout.

Page 104: I look for the following: either a one-week volume spike that is at least twice the average volume of the past month (preferably it is even higher) or a volume build-up over the past three to four weeks that is at least twice the average of the several weeks coupled with at least some increase on the breakout week.

This is the Share Price divided by the EPS. The P/E may apply to the past or to the future based on forecast earnings per share. The trailing P/E is computed by dividing the current stock price by the latest year's earnings per share. P/E is used as a guide, or yardstick, to compare the 'value' in predicted earnings growth of one stock to another. High P/Es mean the stock is highly valued due to its expected increase in earning per share. Utility companies, automobile manufacturers and clothing retailers trade at lower P/Es than high growth stocks like technology stocks. It must be noted that each time a stock's share price changes, so does its P/E. The reciprocal of P/E is the earnings yield. If interest rates are low (usually it is long-term interest rates that are considered), lower earnings yield and therefore higher P/Es) are accepted. Benjamin Graham looked for a P/E ratio not appreciably greater than similar companies. A high P/E suggests the market currently regards the company's prospects as very good. A low P/E suggests that at this time the market does not view the prospects so high. However, as Benjamin Graham advised, it is useful to compare a firm's P/E with its sector average P/E.

Pg 82: The Rule of 19 states that the market P-E ratio has approximated 19 minus the inflation rate in the recent past. Statistical regression analysis supports the historical validity of the is valuation yardstick. At 3 percent inflation; the normal range for the P-E has ranged from 12 to 20, with 16 as the midpoint.

Pg 96: In the late 1970s, Sanjoy Basu, building on the work pf S.F. Nicholson in 1960, discovered that stocks with low price-to-earnings ratios have significantly higher returns than stocks with high price-to-earnings ratios. Benjamin Graham and David Dodd stated people who habitually purchase common stocks at more than about 16 times their average earnings are likely to lose considerable money in the long run. Yet even Benjamin Graham must have felt a need to be flexible on the issue of what constituted an excessive P-E ratio. In their second edition, written in 1940, the same sentence appears with the number 20 substituted for 16 as the upper limit of a reasonable P-E ratio.

Pg 98: Stocks that exhibit low price-to-book and low price-to-earnings ratios are often called value stocks. Historical returns on value stocks have surpassed growth stocks, and this outperformance was especially true among smaller stocks: the smallest value stocks returned 19.51 percent per year, the highest of any of the 25 categories analyzed, with the smallest growth stocks returned only 6.67 percent, the lowest of any category. Stocks for the Long Run by Jeremy Siegel.

Pg 288: I don't mind paying 20 times earnings in a company that is growing at 25%.

Beating The Street by Peter Lynch.

Pg 164: The P/E ratio can be thought of as the number of years it will take the company to earn back the amount of your initial investment-assuming, of course, that the company's earnings stay constant.

Pg 230: -The P/E ratio. It is high or low for this particular company and for similar companies in the same industry.

-The percentage of institutional ownership. The lower the better.

-Whether insiders are buying back its own shares. Both are positive signs.

-The record of earnings growth to date and whether the earnings are sporadic or consistent. One Up on Wall Street by Peter Lynch with John Rothchild, Penguin.

WARREN E BUFFETT 90/10 RULE: My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I've laid out in my will.. My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors - whether pension funds, institutions or individuals - who employ high-fee managers.

Source 2013 Letter to Shareholders of Berkshire Hathaway

On Inflation: [at Berkshire Hathaway's annual meeting on April 30, 2022]: "Inflation swindles the bond investor...it swindles the person who keeps their cash under their mattress, it swindles almost everybody,"

"Inflation... it's extraordinary how much we've seen,"..."For two years the prices have kept coming in higher."

"Inflation swindles the equity investor... [Fortune Classics,1977 ] : "The central problem in the stock market is that the return on capital hasn't risen with inflation.""

On when to buy shares: A great investment opportunity occurs when a marvelous business encounters a onetime huge but solvable problem... when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised."

On having margin for error: This is the cornerstone of our investment philosophy. Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.

On S&P 500 low-cost index fund: Consistently buy an S&P 500 low-cost index fund, Keep buying it through thick and thin, and especially through thin.

On S&P 500 ETF: Consistent investments in an S&P 500 ETF are the surest way to secure a million-dollar retirement". His go to index fund (via Berkshire Hathaway's holdings) is the Vanguard S&P 500 ETF.

On low-cost index funds: Buffett has long recommended that investors put their money in low-cost index funds, which hold every stock in an index, making them automatically diversified.

On S&P 500 index fund: "I recommend the S&P 500 index fund," Buffett said, which holds 500 of the largest companies in the U.S., "and have for a long, long time to people."

Buffett said it's the reason he has instructed the trustee in charge of his estate to invest 90% of his money into the S&P 500, and 10% in treasury bills, for his wife after he dies. "I just think that the best thing to do is buy 90% in S&P 500 index fund."

On Owing Stock: If you don't feel comfortable owning a stock for 10 years, you shouldn't own it for 10 minutes.”