Let us summarize our practical suggestions in the matter of security switches as follows:
The investor who begins with a list of standard, first-grade common stocks can expect some of them to lose quality through the years.
His aim should be to replace these, with a minimum sacrifice of dividend return and with a fair chance of recouping any loss of principal value resulting from their sale.
The best means of accomplishing this is by seeking out attractive issues in the secondary group. A competent security analyst is usually in a position to recommend a number of such issues which by objective tests appear to be worth substantially above their selling price.
The fundamental principle of every security replacement should be the following:
Each dollar paid for the issue bought should appear to obtain more intrinsic value than was represented by a dollar's worth of the issue sold.
We believe, in sum, that quality may be approached soundly by way of value. If the value is abundant, the quality may be deemed sufficient.
Benjamin Graham
No comments:
Post a Comment