Benjamin graham Flashcards
Safety of Principal
Investment is affected by a number of risks.
Interest rates, business cycles, price levels, consumer confidence..(that which affects the value of the investment.)
Some annuity contracts promise 100% return of Principal investment.
Speculative investment strategy
Trading in the market- buying in bull, selling in bear
Short term selectivity- buying based on companies projected returns
Long term selectivity- buying based on a record of past growth.
Annuity
A fixed sum of money paid to someone each year, typically for the rest of their lives
ETF
Exchange traded fund is a marketable security that tracks a stock index, a commodity bonds, or a basket of assets.
Safety-of-Principle
In the 1930s markets were so depressed thatch was not uncommon for stocks to sell at less than the value of their cash in hand (even subtracting debt.)
Book value
This fundamental measure of a company’s worth can help you decide if a stock is attractive. Book value is a key measure that investors use to gauge a stock’s valuation. The book value of a company is the total value of the company’s assets, minus the company’s outstanding liabilities.
Market capital
Market capitalization is the market value of a publicly traded company’s outstanding shares. Market capitalization is equal to the share price multiplied by the number of shares outstanding.
Diminishing returns
used to refer to a point at which the level of profits or benefits gained is less than the amount of money or energy invested.
Equity capital
nvested money that, in contrast to debt capital, is not repaid to the investors in the normal course of business. It represents the risk capital staked by the owners through purchase of a company’s common stock (ordinary shares).
The value of equity capital is computed by estimating the current market value of everything owned by the company from which the total of all liabilities is subtracted. On the balance sheet of the company, equity capital is listed as stockholders’ equity or owners’ equity. Also called equity financing or share capital.
What can help you hedge against inflation?
TIPS- treasury inflation protected services
REITS- Real Estate Investment Trust
What three factories effect stock performance?
- real growth
- inflationary growth
- speculative growth
What is the price/earnings ratio?
The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS). The price-to-earnings ratio is also sometimes known as the price multiple or the earnings multiple.
P/E ratios are used by investors and analysts to determine the relative value of a company’s shares in an apples-to-apples comparison. It can also be used to compare a company against its own historical record or to compare aggregate markets against one another or over time.
Series H bonds
Series H Bonds. Series H bonds were introduced in 1952 as a current interest alternative to Series E bonds. Investors bought Series H bonds at face value. These bonds paid a fixed rate of interest — three percent in 1952 — every six months, with interest payments mailed to the bondholde
Series E bonds
1) assurance of Principal and interest payments
2) right to demand money back
3) guarantees 5% interest for at least 10 years
State and municipal bonds
Municipal bonds are loans investors make to local governments. They are issued by cities, states, counties, or other local governments. For that reason, the interest they pay on the bonds is usually tax-free. Municipal bonds are securities
What type of bonds are except from income tax?
State and municipal bonds
When should you buy preferred stocks?
On a bargain basis or not at all
How does Graham say one can be an intelligent investor?
- By continually selecting and monitoring a dynamic mix of stocks, bonds or mutual funds.
- Creating a permanent portfolio that runs on autopilot and requires very little effort (with very little excitement)
Why should you be skeptic of a company issuing preferred stocks instead of bonds?
Preferred dividend payments aren’t tax deductible and most likely issuing proffered stock because it’s not healthy.
What does Graham say about defensive investment with common stocks?
- Adequate diversification
- Large company
- Long record of continuous dividend payment
- Limit price you will pay on issue based on averages earnings for a particular period.
Growth stocks
A stock that has increased its per-share earnings in the past as well above the rate for common stocks generally expected to continue to do so in the future.
Warren buffet Value investing
essentially buying companies that have a low stock price in relation to their true value. In other words, he buysshares of a good company when it’s “on sale.”
Enterprising investor common stock practices
- Buy in bear, sell in bulk
- Carefully choose growth stocks
- Buy bargain issues
- Look for special situations
How do you appraiser bargain issues?
- Estimating future earnings and then multiplying these by a factor appropriate to the issue price.
- Value business to the owner
When should you sell or avoid growth stocks?
When price/earnings ration goes above 25 or 30
Callable Bonds
A callable bond is a type of bond that allows the issuer of the bond to retain the privilege of redeeming the bond at some point before the bond reaches its date of maturity
