He is prepared, however, and does so regularly, to outline general principles of sound investment. These have a consistent theme and can be summed up like this.
Stock investments should be looked at in the same way as buying a business. The stock investor is really buying a tiny share or partnership and should apply the same principles that they would in buying a business – the Benjamin Graham approach:
1. The company should be soundly managed. Tests of good management include:
- Returns on equity
- Returns on capital