Benjamin Graham, the godfather of value investing and Warren Buffett's mentor, has a secret formula on value investing.
The Graham Number:
Fair Value of a Stock = Square Root of (22.5) x (Earnings Per Share) x (Book Value Per Share)
The math of the Graham number is relatively straightforward. Graham believed that the price-to-earnings (P/EPS) ratio should be no more than 15. He also believed that the price-to-book value (P/BVPS) ratio should be no more than 1.5.
From that, Graham proposed that -- as a rule of thumb -- the product of the two should not be more than 22.5. In other words, (P/EPS of 15) x (P/BVPS of 1.5) = 22.5.
Read more on Graham Number here.
Subscribe to:
Post Comments (Atom)
Popular Posts
-
I would like to apologize that sigining of my guestbook is not possible at the moment due to an unexpected bug. There is already 74 entries ...
-
Singapore's Land Transport Authority has just released an updated official MRT map including one additional station on the Downtown Line... -
*********** Try to sleep now, close your eyes Soon the birds would stop singing Twinkling stars, are shining bright They'll be watch...
-
Installed FortiClient recently but the challenge in disabling the application/service from running automatically on every start-up annoyed m...
-
POLLING Day next Saturday will be a public holiday as Singaporeans go to the polls to cast their votes in Singapore's 11th General Elect...
No comments:
Post a Comment
Do provide your constructive comment. I appreciate that.