benjamin graham

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Just thought I’d share an interesting email:

Jim Grant noted in his recent Interest Rate Observer that eight blue-chip companies now meet or exceed Ben Graham’s strictest criteria for defensive investors: Pfizer, Nucor, Cooper Industries, Cintas, Tiffany, Archer Daniels Midland, Molex, and RadioShack.

These are like superhero investments. Each has

  • 10 consecutive years of net profits
  • 20 consecutive years of uninterrupted dividend payments
  • earnings growth in the past decade of at least 33%
  • price-to-earnings and price-to-book multiples of less than 15

For perspective, Grant notes that at the bottom of the Nasdaq bust in 2003, only two stocks met all those criteria. At the bottom of the market in 1991, only six qualified. (Since 1991, those six produced average annual returns of almost 19%.) If you bought just these eight stocks and forgot about them for a decade, chances are better than 90% you’ll make a substantial return and beat the market. Usually, that’s a lot harder to do.

Note: These, are not my personal recommendations to buy. Do your own Due Diligence.

Today’s guest post comes from Ryan of Semperfinance, a military-community oriented personal finance and stock investment blog.

Education is the key to developing successful investment strategies. Blogs, websites and periodicals are great for staying up to date on the latest and greatest in the financial world, but nothing beats a good old-fashioned book for reinforcing the fundamentals and learning from the masters. Here’s a list of the top 5 investment authors every stock investor should be familiar with.

Benjamin Graham

Considered the father of value investing, he invented the Mr. Market metaphor and advised evaluating stocks as one would evaluate a business. Graham, a Columbia business school professor, published Security Analysis in the midst of the Great Depression. Anyone who can successfully sell books on stock investing during the Great Depression is worth taking a look at. Warren Buffet considers himself a disciple of Graham, even naming one of his sons (Howard Graham Buffett) after him. Every investor should be familiar with his work.

Recommended Books:

Warren Buffett

While not an author of books, Buffett has written many articles and (now famous) letters to shareholders. His writing contains homey Midwestern wisdom, jokes and pearls of investing wisdom. Buffett was greatly influenced by mentor Graham whose work he draws upon, but he has his own insights developed over many years of successful, smart investing.

Recommended Books:

Peter Lynch

Peter Lynch was an investing legend. His should be admired for his work ethic as much as his stock picks. Lynch practiced due diligence in picking stocks 24/7. Even on vacation he would ski a run, call a company to speak to the management then get back on the chairlift and do it over again. Like Buffett and Graham, Lynch advised focusing on company fundamentals and did not try to predict the market.

Recommended Books:

Tom and David Gardner

These two brothers were taught stock market investing by their father and ushered stock investing into the Internet era with their landmark website, fool.com. These guys have created the “Foolish” philosophy of bucking the trends of the “Wise” on Wall Street.

Recommended Books:

Robert Kiyosaki

Some people hate Kiyosaki, but I think he has some very good points to make. Don’t expect a lot of specific investment advice from Kiyosaki, instead he reinforces fundamental financial principles every investor should espouse.

Recommended Books:

If you haven’t read all of these books, you’re missing out on your financial education. Get started today!