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Finance: What is Graham and Dodd? 0 Views
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Description:
What is Graham and Dodd? The Graham and Dodd method is a way of valuing stocks. Their goal was to find stocks that were really undervalued; so using their method shows investors these undervalued stocks so they can rake in the profit (potentially). The stocks their method would recommend are currently sitting at prices that are below calculated net asset values.
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Transcript
- 00:00
Finance allah shmoop what is the gram and dod investment
- 00:06
style Well they're old geezers who literally wrote the book
- 00:11
on value investing all right value that is companies where
- 00:15
the dollar invested today can be easily mathematically mapped out
- 00:19
such that the company returns well more than a dollar
Full Transcript
- 00:22
in a relatively short time period like either in earnings
- 00:25
or dividends or both All right think generally low p
- 00:28
e ratios here in value investing high dividends modest growth
- 00:33
highly predictable A revenue stream and no huge capital expenditures
- 00:39
needed down the road We'll a key distinction of the
- 00:41
gram and dod system was to buy low and then
- 00:45
sell when fairly priced not like buy low sell high
- 00:48
as the cliche goes and this is the opposite of
- 00:51
a momenta Mohr go go investor who's kind of like
- 00:55
buy high sell higher kind of pattern Yeah well the
- 00:58
core idea that comprises investing logic is that if you
- 01:01
invest a dollar today you expect to get more than
- 01:03
a dollar back tomorrow or next year or next decade
- 01:06
So if a company has no debt in a dollar
- 01:08
of cash and will earn a dollar this here in
- 01:10
dollars ten next year in a dollar twenty The next
- 01:12
they're just plants keep its cash or buy back stock
- 01:14
with it and that company can be bought for ten
- 01:17
bucks a share Then it's a value stock in today's
- 01:20
world in graham and dod would probably be along that
- 01:23
stock or buy it well The equity value of the
- 01:25
company in this case is nine bucks a share After
- 01:28
subtracting that dollars share of cash with earnings growing slowly
- 01:31
and steadily life is grand with very low downside risk
- 01:36
and the company should be able to double in value
- 01:38
all else being equal about every six seven eight years
- 01:40
or so with very high predictability and well that's Very
- 01:44
nice investment Turn for value investors So graham is yoda
- 01:47
dada's obi wan and they note the fine picture of
- 01:51
their disciple here Luke that's biggest fan Look sharp it 00:01:56.308 --> [endTime] geico
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