Normalizing Cisco; Greenwald Notes on Growth Investing; Graham’s Advice to an Analyst

Century Management Video Presentation October 2012

Valuing Csco:  

The presentation is short and leaves out many details, but using the last crises in 2008/2009 as a marker or stress test for how the business will fare in tough times is a technique you can use.

Greenwald’s Notes on Growth Investing

Intro to VI Valuing Growth 2007     

Ben Graham’s Words of Wisdom for Aspiring Security Analysts

The qualified analyst, he wrote, would: possess “good character.” To him, the word “character” captures not just how you act but how you think. ”Character” is a synonym for “rationality.”  Graham explains how he uses the word, “intelligent” as meaning “endowed with the capacity for knowledge and understand.” It will not be taken to mean “smart” or “shrewd,” or gifted with unusual foresight or insight. Actually the intelligence described is a trait more of character than of the brain.

And, in 1976, he summed up investing with these words:

“The main point is to have the right general principles and the character to stick with them.”

“An analyst,” Graham said, “must possess good character and have a hunger for objective evidence, an independent and skeptical outlook that takes nothing on faith (especially one’s own beliefs), the patience and discipline to stick to your own convictions when the market insists that you are wrong, and serene imperturbability—the ability to stay calm and keep your head when all investors about you are losing theirs.

Graham’s advice to young analysts:

I would tell them to study the past record of the stock market, study their own capabilities, and find out whether they can identify an approach to investment they feel would be satisfactory in their own case. And if they have done that, pursue that without any reference to what other people do or think or say. Stick to their own methods.

Editor: Great advice, though tough to follow consistently with our human frailties.

A great post on Buffett Partnership Performance

Good Book on Capitalism: The Case for Legalizing Capitalism  By the way, what’s capitalism?


3 responses to “Normalizing Cisco; Greenwald Notes on Growth Investing; Graham’s Advice to an Analyst

  1. Thanks for the interesting presentation link by Century mgmt.

    I got Cisco in my portfolio, also because it lists in the high factor exposure to ROA & low PE in the magic formula list (

    What is interesting in the presentation I think, is the “Value Line 1700 median PE”. What are your opinions on the usefulness of this metric vis-à-vis a normal P/E index?

    My opinion: The guy says the median does not weigh the high valuation stocks, (me: but it doesn’t weigh the valuation of bargains either!).

    Libertarian greets from Belgium

  2. For Greenwald’s notes, does anyone follow where the #’s on slide 20 come from? Presumably it’s putting into practice the procedure described on slide 17 so…

    “Cash” must be expected dividend yield + stock repurchases

    “RE” is reinvestment return? Maybe this is ROE*(1-DivPayoutRatio) but what are these values in parentheses underneath (1x Capital Allocation, 2×2%)

    “Growth” is probably some estimate of how the company grows +/-GDP. But why these instead of the second “growth” rates under the company name.


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