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Title: Trouncing the Dow: A Value-Based Method for Making Huge Profits in the Stock Market by Kenneth Lee ISBN: 0-07-038301-4 Publisher: McGraw-Hill Trade Pub. Date: 31 August, 1998 Format: Hardcover Volumes: 1 List Price(USD): $24.95 |
Average Customer Rating: 4.13 (45 reviews)
Rating: 5
Summary: Excellent, easy to read conservative investing strategy.
Comment: Kenneth Lee's new book, "Trouncing the Dow" is an easy to read, new, conservative investing strategy based on purchasing only those stocks that are trading below their downside target prices. I found this book to be refreshing and practical. Mr. Lee takes readers through his "Benchmark Investing Formula", a seven step process, to arrive at a stock's historical average return on equity for the past ten years. The idea is to purchase stocks trading near or below their past ten year average. In a market that many analysts and investors consider overvalued, Mr. Lee shows readers how to avoid the overvalued stocks and select stocks where the downside risk is low. Mr. Lee goes through his formula with detailed examples, talks about exceptions to the rules and gives a lot of historical data to support his strategy. Mr. Lee's stock picking strategy appears to be sound and logical and is supported by solid data. It's a conservative approach which should be appealing to long term investors trying to increase returns while minimizing risk. I highly recommend this book to serious investors.
Rating: 3
Summary: A Different Angle On Betting Dow Value
Comment: The 1990's have brought a striking popularity in books that promise outsize returns based on simple formulas. The most obvious example of the genre is the Dow Dogs strategy. Made popular by Michael O'Higgins and Jim O'Shaughnessy, among others, underperformance in recent years has done little to dampen investor enthusiasm.
Kenneth Lee's Trouncing The Dow offers a new twist on betting the undervalued Dow stocks theory. Employing a methodology he dubs benchmark investing, Lee seeks to establish price ranges using historical return on equity and price/book value figures. Once established these price ranges are used to establish concrete reference points the investor can use to consistently focus on undervalued stocks. The book has tables of the calculations from 1973-96, allowing those so inclined to compare current valuations with past Dow results under most market conditions. The process also forces the reader to dig into a company's fundamentals and get a feel for how it has been priced in the past.
The appeal here is obvious. A concise method for divining value on a select group of non-volatile stocks where information is readily available. (Lee suggests using The Value Line Investment Survey). The mechanical process eliminates emotion from the equation, allowing the reader to use history as a guide when uncertainty has gripped the market. The fact that Lee stresses low turnover, eschews market timing, and adheres to popular value tenets puts the ideas here on the same wavelength as studies produced recently in books by Jeremy Siegel and Jim O'Shaughnessy. Personally however, when I see strategies based on Dow stocks I tend to want to see computer studies based on similar stocks. I want to see large samples. They give the picture texture and background, they help point out any possible flaws or reasons for concern. Back testing has its limitations. Early on Lee states he originally developed the formula employing the Value Line universe on a computer. In fact, the current configuration of Value Line's electronic product makes Lee's process relatively easy to implement on a broad scale. To include summaries of the results of that data would have added considerable weight to his argument.
It seems to me that the real question here is whether anomalies pointed out here and popularized by O'Higgins and others will continue to outperform. Indeed, many of the ideas here overlap with popular titles of the last few years. Is the Wall Street establishment so short-term focused that long-term value plays based on simple rules offer an easy short cut? Though many would like to deny it, there is enough efficiency in the United States equity markets to make outperformance a relatively difficult task. Though the idea of "beating the experts" without complex strategies makes a cute media story, it continues to be a tall order.
In Trouncing The Dow, Lee makes the case it can be done. The book is a quick read and offers a formula that anyone can employ to make up his or her own mind.
Rating: 5
Summary: A 2003 Review
Comment: The 10 most undervalued stocks selected by benchmark investing (as taught in my book) from the S&P 100 averaged 51.20 percent in 2003 versus 23.84 percent for the index itself. The top five picks performed even better, up an average 80.82 percent.
Obviously, 2003 was a good year for stocks. But had you used benchmark investing beginning in 2000 until the end of last year, and bought the 10 most undervalued stocks from the S&P 100 you would have enjoyed a compounded total average return of 8.71 percent. During the same period, the index lost an average of -7.69 percent a year. So, you might want to take a look at benchmark investing in this book.
P.S. I do NOT have any web sites on the net, so don't assume I'm involved with any of them.
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Title: It's Earnings That Count : Finding Stocks with Earnings Power for Long-term Profits by Hewitt Heiserman Jr. ISBN: 0071423230 Publisher: McGraw-Hill Trade Pub. Date: 21 November, 2003 List Price(USD): $27.95 |
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Title: Ahead of the Market : The Zacks Method for Spotting Stocks Early -- In Any Economy by Mitch Zacks, Mitchel Zacks ISBN: 0060099682 Publisher: HarperBusiness Pub. Date: 18 March, 2003 List Price(USD): $26.95 |
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Title: Beating the Dow with Bonds : A High-Return, Low-Risk Strategy for Outperforming the Pros Even When Stocks Go South by Michael B. O'Higgins, John McCarty ISBN: 088730883X Publisher: HarperBusiness Pub. Date: 01 March, 2000 List Price(USD): $15.00 |
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Title: Beating the Dow (Revised and Updated) by Michael B. O'Higgins, John Downes ISBN: 0066620473 Publisher: HarperBusiness Pub. Date: 15 March, 2000 List Price(USD): $15.00 |
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Title: Tomorrow's Gold: Asia's Age of Discovery by Marc Faber ISBN: 9628606727 Publisher: CLSA Pub. Date: 12 November, 2002 List Price(USD): $35.95 |
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