Cabot Investors Conference 2013 Value Investing Roy Ward Research Analyst, Cabot Benjamin Graham Value Investor [email protected]

Cabot Investors Conference 2013 www.cabot.net

Value Investing

Roy Ward

Research Analyst, Cabot Benjamin Graham Value

[email protected]


What is Value Investing?• Allocate growth and value stocks in

your portfolio• Using the Benjamin Graham approach• Using the Warren Buffett approach• Using the simplest and best approach• Reducing risk• How to outperform the stock market

indexes by a wide margin


What is Value Investing?

• Three examples• Understand Different Approaches• Use All Three?


Portfolio Allocation

• Diversify with value and growth stocks 50/50

• Value portion should be high-quality, conservative stocks and medium risk stocks

• Every portfolio should contain conservative core stocks for long-term holding

• Diversify across various industry sectors• Invest equal dollar amounts in each

company


Ben Graham Approach1. P/E less than 9.02. P/BV less than 1.203. Dividend greater than zer.4. Long Term Debt/Current Assets less than

1.105. Current Assets/Current Liabilities greater

than 1.506. No Earnings Deficits last 5 Years7. S&P Quality Rank B+ or higherResults: Medium risk stocks with 2 to 3%

dividend yields, typically low growth or turn-around situations. Corning (GLW), Prudential (PRU), Xerox (XRX)


Warren Buffett Approach

1. Estimate intrinsic value of company to determine optimum buy price and sell price

2. Invest in high-quality companies with strong balance sheets

3. Choose companies with steady earnings growth during the past decade

4. Favor companies paying dividends

Results: Low risk stocks with 2 to 3% dividends, typically moderate growth. Cognizant Technologies (CTSH), Qualcomm (QCOM), Tupperware (TUP)


Simplified Value Approach

1. Use Standard & Poor’s – Ben Graham did!

2. Find stocks with S&P Stars Ratings of 4 or 5

3. And S&P Fair Value Ratings of 4 or 54. S&P Quality Ratings of A+, A, or A-;

occasionally B+5. Read about company outlook on

company website and research reports6. Choose stocks from various industry

sectors


Risk

1. Reduce risk when the stock market is high

2Increase risk when the stock market is low

3. Current risk level is 55% ultra-low risk stocks (in place of bonds) and 45% low-to-medium risk stocks

4. Be more aggressive when you are young and less aggressive when you approach retirement


How to Beat the Market!

1. Establish a system2. Write down the details of your

system step by step3. Follow your system and stick

with it through good times and bad times

4. Have fun but keep in mind this is your hard-earned money that you are going to depend on when retired


Questions?

Thank you for your participation!

Now, let’s go out and make lots of money!


Documents

Cabot Investors Conference 2013 Value Investing Roy Ward Research Analyst, Cabot Benjamin Graham Value Investor [email protected]