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If you are a fan of Magic Investing, you should read this. Well written, a quick read, and gives some background to the online website.
Well worth a read and a good start for the beginning or intermediate investor who wants to beat the market over time.
First of all, I purchased this book, and did it as it suggested, but failed.then I tried to learn some other basic book, such as "Stock Trend analysis", you will find this book did NOT teach you anything, and just ask you to believe some "Magic" in the world, if everyone has this book and follow what the author suggested, then everyone will make money from stock market, it is simply not true.
The business valuations are known and you decide to sale part of the company as stock. Knowing the value of the company and having confidence the future value of the company will appreciate validates the buying price of the stock. For some time after the great depression stock investment was considered risky.5.Suppose, you own a company and that company is making a profit. The equation is a long-term performer and eventually outperforms the competition significantly. Find 30 stocks with the equation criteria for your portfolio. The stock price, at this point is deterministic. However, the price of the stock fluctuates randomly away from the price too earnings, it initially started. However, short term price fluctuation will not reveal any future pattern.
Graham identified prices at this level, as, "unreasonable prices". 1.The best equation is buying good companies with high rates of return on the capital and high earnings yields.2.Margin of safety assumes the investor can not know the future; therefore, the best opportunity is to buy the stock of a good company, at discount. 7.The equation equals buying stocks with high earnings and high return on capital; these stocks come from good companies and are bargain priced.8.How do we choose good companies at bargain prices. But should you care that the price is fluctuation wildly. Buying high earning stock at bargain price allows you to earn income from dividend payments with relative without price dropping out.
The stock price is equal to the business valuation divided by the number of stock. In one case study, the stocks performed 30% returns for 17 years. The profits are reflected on the income statement. The stock price can be easily computed. Most, investors shy away from seizing the opportunity at discount prices fearing greater valuation losses due to some undiscovered information, they are not aware.3.Buying stock is equivalent to owning a percentage of the company.
Eliminate companies that earn ordinary or poor returns on capital. Companies with high rates of return on the capital and high earnings yields are ranked highest. Choose companies through a ranking system. The company continues to operate and report profits. No. Readjust your portfolio every three years according to rank.
The optimum discount pricing for buying is near or below liquidation price. Companies with a high return on capital are likely to achieve an advantage of kind. Companies with good brand name can perform against competitors, who want a portion of the profits. The equation works better than market averages and did not lose money.
You will have to be patient. 6.You want to know the valuation of the business and using this valuation will predict the stock's value and support price to buy and sale. Otherwise, he will invest his money into bonds and gain a fixed interest income.4.Investors have a hard time at making predictions. Do be afraid of losing clients during short term drops in the valuation of the portfolio, instead, have confidence the equation will work long term.9.If we know how a group of stock high earnings and high capital returns perform on the average, we gain greater confidence of how they will perform in the future.
The price swings vary, at times people are paying out outrageous price; and at other times missing bargain prices. You don't care, about the causes, for the price fluctuation, only that price fluctuated. Don't buy and sell short term because the chances are high that you will lose, instead, invest long-term. The equation will work in the long-term.10.Look for companies you believe will be able to continue in business for many years and companies that should be able to grow their earnings over time.
Unless you are a novice investor, what you're paying for is the "magic formula" given in the middle of the book. The rest is a simplied version of how the market works.
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