How to pick Multi-Baggers

"To achieve satisfactory investment results is easier than most people realise; to achieve superior results is harder than it looks."
- Benjamin Graham

Here are the key lessons from a study:
■Bad businesses can never create a multi-bagger, though they can create transitory multi-baggers during short phases when the conditions are good.
■Bad managements with good businesses are likely to create only transitory gainers.
■Overpriced shares have no chance of becoming multi-baggers ever.

So the only way one can hope to find lasting multi-baggers is by buying into great businesses run by good managements purchased at huge margin of safety.



Why some multi-baggers destroy wealth eventually
Having said that, it is not that one could get rich for ever by buying multi-baggers. The study says there are two types of multi-baggers: 

• Enduring multi-baggers and 
• Transitory multi-baggers.

Enduring multi-baggers are those companies whose wealth creation is long-lasting and correction from the peak valuation is limited.

• In fact, they continue to exist as multi-baggers even after the correction.
• The enduring multi-bagging companies are typically few and difficult to be spotted, and 
• most of the time they appear to be expensive at the time of buying because of the lack of faith in their longevity and size of growth.

Transitory multi-baggers, on the contrary, are easier to be spotted but they always end up giving nasty end results.

• Corrections are typically almost 100 per cent. 
• Cyclicals broadly come under this category. 
• The tragedy with this class of companies is that if you cannot sell in time, nothing is left in your hand.
• But as correction is inevitable, market as a whole is left high and dry with a bad experience. 
• These companies are plenty and easy to be found, and they attract a lot of crowd.

The result reveals that most of the multi-baggers were transitory in nature during this period and they threw back all the wealth that had been created on their journey upwards.




What is the winning strategy?
"Stocks are simple. All you do is buy shares in a great business - with managers of the highest integrity and ability - for less than the business is intrinsically worth. Then you own those shares forever."
- Warren Buffet


In essence, weak managements will lead only to transitory gainers whereas good managements can shine only if business performance helps.


As per Warren Buffet: "With a few exceptions, when management with a reputation for brilliance tackles a business with a reputation for poor fundamentals, it is the reputation of the business that remains intact."


So it boils down to the fact that for the making of enduring multi-baggers, a good business with a good management is necessary.





Price/value:


"Have the purchase price be so attractive that even a mediocre sale gives attractive returns."
- Warren Buffet


One factor, which is absolutely important for making a multi-bagger, is gross under-valuation or huge margin of safety in price at the time of purchase.


Some of the pointers to under-valued stocks are one or more of the following:
■Low price in relation to asset value
■Low price in relation to earnings and cash flows
■Sustained purchase by insiders
■A significant decline in stock prices
■Small market capitalisation with growth


Also, the best time to get a huge margin of safety is when:
■Business conditions are unfavorable and near-term prospects look poor.
■When low prices of stocks reflect the current pessimism either in a particular stock or in the market as a whole.
■When a large company's performance is hit and the pessimism is fully reflected in the price.


Low P/E and P/B works because:
■The reinvested earnings are substantial in relation to the price paid. The effect of large earnings addition year after year keeps adding to the intrinsic strength of the stock and, hence, can't be ignored by the market for long.
■The bull market is typically very generous to low-priced issues and thus will raise the typical bargain issue to at least a reasonable level.
■There could be chances of smaller companies with high earnings being taken over by larger ones as a part of diversification programme.


http://myinvestingnotes.blogspot.it/2009/09/how-to-pick-multi-baggers.html

My 18 points guide to Successfully compounding your money in Stocks

1. Be a good stock picker.  
2. Think as a business owner.
3. Always look at value rather than the price.  Do the homework.
4. Buy and hold is alright for selected stocks.
5. Compounding is your friend, get this to work the magic for you.
6. Mr. Market is there to be taken advantage of.  Do not be the sucker instead.  BFS;STS.
7. Always buy a lot when the price is low.  Doing so locks in a higher potential return and minimise the potential loss.  But then, if you have confidence in your stock picking, you would have picked a winner - it is only how much return it will deliver over time.
8. Never buy when the stock is overpriced.  Not observing this rule will result in loss in your investing.  This strategy is critical as it protects against loss.
9. It is alright to buy when the selected stock is at a fair price.
10. Phasing in or dollar cost averaging is safe for such stocks during a downtrend, unless the the price is still obviously too high.
11. Do not time the market for such or any stocks.   Timing can increase returns and similarly harms the returns from your investment. It is impossible to predict the short term volatility of the stock, therefore, it is better to bet on the long-term business prospect of the company which is more predictable. 
12. By keeping to the above strategy, the returns will be delivered through the growth of the company's business. 
13. So, when do you sell the stock?  Almost never, as long as the fundamentals remain sound and the future prospects intact.    
14. The downside risk is protected through only buying when the price is low or fairly priced.  Therefore, when the price is trending downwards and when it is obviously below intrinsic value, do not harm your portfolio by selling to "protect your gains" or "to minimise your loss."  Instead, you should be brave and courageous (this can be very difficult for those not properly wired)  to add more to your portfolio through dollar cost averaging or phasing in your new purchases.  This strategy is very safe for selected high quality stocks as long as you are confident and know your valuation.  It has the same effect of averaging down the cost of your purchase price.  However, unlike selling your shares to do so, buying more below intrinsic value ensures that your money will always be invested to capture the long term returns offered by the business of the selected stock.
15. Tactical dynamic asset allocation or rebalancing based on valuation can be employed but this sounds easier than is practical, except in extreme market situations.  Tactical dynamic asset allocation or rebalancing involves selling at the right price and buying at the right price based on valuation.  Assuming you can get your buying and your selling correct 80% of the time;, to get both of them right for a profitable transaction is only slightly better than chance (80% x 80% = 64%).  Except for the extremes of the market, for most (perhaps, almost all of the time), for such stocks, it is better to stay invested (buy, hold, accumulate more) for the long haul.
16. Sell urgently when the company business fundamental has deteriorated irreversibly. (Reminder:  Transmile)
17. You may also wish to sell  should the growth of the company has obviously slowed and you can reinvest into another company with greater growth potential of similar quality.  However, unlike point 14, you can do so leisurely.
18. In conclusion, a critical key to successful investing is in your stock picking ability.  To be able to do so, you will need to acquire the following skills:

• To formulate an investing philosophy and strategy suitable for your investing time horizon, risk tolerance profile and investment objectives.
• The knowledge to value the business of the company.  
• The discipline to always focus on value.
• The willingness to do your homework diligently.
• A good grasp of behavioural finance to understand your internal and external responses to the price fluctuations of the stock in the stock market.
• A good rational thinking regarding the risks (dangers) and rewards (opportunities) generated by the price fluctuations of the stock in the stock market.

Is it not true, that the really big fortunes from common stocks have been garnered by those 

• who made a substantial commitment in the early years of a company in whose future they had great confidence and 
• who held their original shares unwaveringly while they increased 10-fold or 100-fold or more in value?

The answer is "Yes."  

http://myinvestingnotes.blogspot.it/2010/02/growth-stocks-as-class-has-striking.html
http://myinvestingnotes.blogspot.it/p/keep-investing-simple-and-safe-kiss.html

5 Companies You Can Buy Today

By Morgan Housel
July 6, 2012

There are many ways to value a company. Price to earnings. Price to cash flow. Liquidation value. Price per eyeballs on website. Price to a number I made up (this one never gets old). Price to CEO's ego divided by lobbying activity as a percentage of revenue (this one doesn't get used enough).

Which one is best? They're all limited and reliant on assumptions. No single metric holds everything you need to know.

The metric I'm using today is no different. But it's perhaps the most encompassing, and least susceptible to hidden complexities of a company's financial statements. The more I think about it, the more I feel it's one of the most useful metrics out there.

What is it? Enterprise value over unlevered free cash flow.                                                       

• Enterprise value is market capitalization (share price times shares outstanding) plus total debt and minority interests, minus cash.
• Unlevered cash flow is free cash flow with interest paid on outstanding debt added back in.

The ratio of these two statistics provides a valuation metric that takes into consideration allproviders of capital -- both stockholders and bondholders.

But you invest in common stock, so why should you care about bondholders? Ask Lehman Brothers investors why. When a company earns money, it has to take care of bondholders before you, the common shareholder, get a dime. Focusing solely on profits and equity can be misleading.

Enterprise value provides a more encompassing view. By bringing debt capital into the situation, we see real earnings in relation to the company's entire capital structure. If you owned the entire business, this is the metric you'd naturally gravitate toward.

Using this metric, here are five companies I found that look attractive.

Company	Enterprise Value/Unlevered FCF	5-Year Average	CAPS Rating (out of 5)
Google (Nasdaq: GOOG  )	18.1	35.2	****
Johnson & Johnson(NYSE: JNJ  )	19.8	21.9	*****
Procter & Gamble (NYSE:PG  )	24.6	28.4	*****
UnitedHealth Group(NYSE: UNH  )	6.9	10.2	*****
Colgate-Palmolive (NYSE:CL  )	22.8	24.4	*****

Source: S&P Capital IQ.

Let's say a few words about these companies.

Three years ago, Warren Buffett and Charlie Munger had some flattering words for Google. "Google has a huge new moat. In fact I've probably never seen such a wide moat." Munger said. "I don't know how to take it away from them," Buffett said. "Their moat is filled with sharks!" Munger added.

Here's a good example: After trying to make inroads in the online ad business, Microsoft just wrote down almost the entire value of its 2007 purchase of aQuantive. The Daily Beast summed it up well: "Microsoft's $6.2 Billion Writedown Shows It's Losing War With Google."

I still like Microsoft because it's good at what it does. But advertising and search isn't it. That's Google's turf. And today you can buy Google at literally the lowest price-to-cash-flow ratio ever. Take advantage of that while it lasts.

Johnson & Johnson is one of the best-performing stocks over the last several decades. But it's having a rough go of it lately. Recalls, management blunders, more recalls, competition from generics... and on and on. Yes, growth has slowed. Yes, it might stay slow for a while. But valuation more than compensates for that. The stock currently provides a 3.6% dividend yield, and trades for 12 times next year's earnings -- below the market average. It's a good company at a good price.

Procter & Gamble is a similar story. One of the world's greatest collections of brands has hit a slowdown. That's hit shareholder returns -- P&G shares haven't budged in two years. But most of the company's missteps appear to be tied to poor execution by management. My guess: Within a year or two the company will have a new CEO, and the market will come to appreciate its value anew.

Everything important you need to know about UnitedHealth Group comes down to the Affordable Care Act, also known as Obamacare. Most health insurance companies currently trade at depressed valuations, likely because the market hates uncertainty -- something that still exists even after the Supreme Court ruled Obamacare constitutional.

But what are the two most likely outcomes here? One is that Obamacare remains law, in which case insurers will face a raft of costly new rules, but also a flood of new customers essentially mandated to buy their product. The other is that Obamacare is repealed -- likely under a Romney administration -- in which case those costly new rules would go away. Neither outcome seems particularly bad for insurers.

Past performance is no guarantee of future returns, but I can't help but point out how successful Colgate-Palmolive has been over the last 30 years. The toothpaste and soap company has produced average returns of nearly 17% a year since 1980, compared with 11% for the broader market. That's the power of two forces: A strong brand, and simple products that aren't pushed to extinction by new technology. Combine that with a pretty reasonable valuation, and Colgate-Palmolive should be a great company to own for years to come.

http://www.fool.com/investing/general/2012/07/06/5-companies-you-can-buy-today.aspx

The largest banking corruption scandal in history - The Libor Banking Scandal

Published on 4 Jul 2012 by 2012sprint

Watch this video to understand the largest banking corruption scandal in history. These large banks have stolen money from every single human on the planet. Not one person was left out. Not even YOU! Now that it is exposed there is no going back. We will ALL support the "NO MORE BAILOUT" mantra...

This one will not go away. It was not planned to go away like other "banking scandals". This one will build and build and build until it is known by every man, woman and child on the planet. This is the exposure that will END the bad guys reign.

I've said it over and over: Timing, timing, timing.

The evil vampire banksters have been stabbed in the heart with various stakes in the past few months but this one is by far the largest. (note: the last one will be made of SILVER so be ready for it!)

http://www.roadtoroota.com/public/570.cfm?awt_l=Hj.JM&awt_m=3aquxoPW7V4C85B

Know this: All is going as planned for the Good Guys.

May the Road you choose be the Right Road.

Bix Weir
www.RoadtoRoota.com
--------------------------------------------------------------------------------­----------------------
VIDEO:"Viewpoint" host Eliot Spitzer, Matt Taibbi, Rolling Stone contributing editor, and Dennis Kelleher, president and CEO of Better Markets, analyze the Libor interest rate--rigging scandal engulfing the banking industry.

Barclays CEO Bob Diamond recently resigned after the bank was fined $453 million for its part in the scandal, which involved manipulating the London Interbank Offered Rate (Libor), a key global benchmark for interest rates, by essentially "faking their credit scores," according to Taibbi. And as Taibbi explains, Barclays couldn't have acted alone.

"It can't just be Barclays and the Royal Bank of Scotland. In fact, it can't even be four banks or even five banks," he says. "Really, in the end it's probably going to come out that it's going to be all of them ... involved in this. And that's what's critical for people to understand: that this is a cartel-style corruption."

Kelleher argues that the Libor scandal is proof that the financial industry "is corrupt and rotten to its core." "The same executives [using] the same business model that crashed the entire financial system in '08 are still running these banks," he says.

'The mob learned from Wall Street': Eliot Spitzer on the 'cartel-style corruption' behind Libor scam
July 3, 2012
http://current.com/shows/viewpoint/videos/the-mob-learned-from-wall-street-el...

The Biggest Financial Scam In World History
http://www.infowars.com/the-biggest-financial-scam-in-world-history/

Barclays Brawl: 'Elite manipulated market, UK laws only give slap on wrist'
http://www.youtube.com/watch?v=mSWUowKuSzI

Keiser Technique for financial criminals
http://www.youtube.com/watch?v=tcbtHeQSrmw&list=UUpwvZwUam-
--------------------------------------------------------------------------------­----
Some norwegian links:
http://e24.no/boers-og-finans/jeg-elsker-barclays/20250028
http://e24.no/boers-og-finans/barclays-hevder-bank-of-england-oppmuntret-til-...
http://e24.no/moody-s-nedgraderer-barclays/20250282
http://www.dn.no/forsiden/utenriks/article2429409.ece
http://www.dn.no/forsiden/borsMarked/article2429806.ece
http://www.dagbladet.no/2012/07/05/kultur/religion/vatikanet/paven/cern/22432...

Three central banks take action in sign of alarm

Arrangement of various world currencies including Chinese Yuan, US Dollar, Euro, British Pound, pictured in Warsaw, January 25, 2011

Credit: Reuters/Kacper Pempel

BEIJING/FRANKFURT | Thu Jul 5, 2012 8:30pm BST

(Reuters) - China, the euro zone and Britain loosened monetary policy in the space of less than an hour on Thursday, signalling a growing level of alarm about the world economy, although suggestions of coordinated action were played down.

Of the three, the surprise move was from Beijing which lowered its lending rate by 31 basis points to 6 percent following an interest rate cut just a month ago that also came out of the blue.

The European Central Bank cut rates to a record low 0.75 percent following a dire run of economic data. But it steered clear of bolder moves such as reviving its government bond-buying programme or flooding banks with more long-term liquidity.

Still, a Reuters poll found the ECB is expected to follow the rate cut with more steps to help the region's economy in coming months.

The Bank of England, whose rates are already at a record low 0.5 percent, said it would restart its printing presses and buy 50 billion pounds ($78 billion) of assets with newly created money to help the economy out of recession.

"It is a surprise that they are moving so quickly. It shows that policymakers' concerns about the global economy have only grown," Mark Williams, an economist at Capital Economics in London, said of the People's Bank of China's action.

A raft of Chinese data is due next week, including second-quarter gross domestic product that officials may know to be poor, he said. But they may also be trying to foster suggestions of acting in concert.

"Policymakers may have felt that cutting rates on the day that the ECB (did) the same would deliver a bigger impact, encouraging talk of a coordinated response to the slowdown in the global economy," Williams said. "Again, though, this might simply underline the seriousness of the downside risks."

"NO COORDINATION"

In Frankfurt, ECB President Mario Draghi denied any globally coordinated central bank action of the sort seen after the collapse of Lehman Brothers in 2008.

"On coordination, no, there wasn't any ... that went beyond the normal exchange of views on the state of the business cycle, on the state of the economy, and on the state of global demand," he told a news conference.

Asked if conditions were now as bad as they were in late 2008 when the world's financial system was teetering, Draghi replied: "Definitely not."

The action puts even more focus on what the U.S. Federal Reserve will do when it holds its next meeting on July 31 and August 1. The Bank of Japan meets next week.

Last month, the Fed held off on another round of bond-buying but its chief, Ben Bernanke, said there was "considerable scope to do more" and Wall Street bond firms polled by Reuters saw a 50 percent chance of another asset purchase programme.

Some encouraging data on the labour market on Thursday tempered anticipation the central bank could undertake a third round of bond purchases, known as quantitative easing or QE3.

But more weight will be given to Friday's nonfarm payrolls report, which is expected to show job growth picked up in June but still remained tepid at 90,000 jobs.

"If we get a couple of more bad jobs reports, (the Fed) will come in with more stimulus. Today's reports suggest they might hold off, but they will want to see more data before they decide," said John Canally, economist and investment strategist at LPL Financial in Boston.

In recent weeks, economic evidence from Asia, Europe and the United States has pointed to a world economy running out of steam.

WILL IT WORK?

All the major central banks, with interest rates at historic lows, face the law of diminishing returns.

The Bank had already created 325 billion pounds of new money before Thursday's addition. In doing so, it has successfully driven borrowing costs to all-time lows, yet the UK economy is languishing in recession.

"The BoE has been excessively optimistic about how powerful QE is," said Philip Rush, an economist at Nomura, referring to the money-creating strategies known as qualitative easing.

"The latest increase is more than just a token, but it is not hugely significant for the outlook for growth and inflation."

A poll conducted by Reuters found 27 out of 47 economists believe the central bank will stop at the announced 375 billion pounds in total. A minority said the Bank would do more, with a few still calling for as much as 500 billion.

The euro zone is no better off. "We see now a weakening basically of growth in the whole of the euro area, including the country or the countries that had not experienced that before," Draghi said.

Policymakers could counter that things would be much worse if they had not acted, but with most monetary policy levers already pulled, government action is also required to improve the world's fortunes.

The International Monetary Fund has urged the United States to quickly remove the uncertainty over the path of fiscal policy, which is set to tighten abruptly at the start of next year without congressional action.

Measures announced at a European summit last week bought some calm to the euro zone debt crisis with the promise of action to lower government borrowing costs, but economists say they did not tackle the root problems.

The ECB continues to put the onus on euro zone governments to solve their debt crisis and did not even discuss on Thursday "non-standard" measures such as buying Spanish and Italian bonds to lower borrowing costs which are not sustainable indefinitely.

Elsewhere, Denmark's central bank cut interest rates by 25 basis points, shadowing the ECB's action, in a historic move that put one of its secondary rates into negative territory for the first time. Kenya ended its nine-months-long hawkish stance with a bigger-than-expected 150 basis points rate cut. ($1 = 0.6419 British pounds)

(Writing by Mike Peacock, reporting by Reuters bureaus; Editing by Peter Graff and Leslie Gevirtz)

http://uk.reuters.com/article/2012/07/05/uk-centralbanks-action-idUKBRE8640RI20120705

Ailing Britain's central bank turns money taps back on. Quantitative Easing 3.

Pedestrians pass The Bank of England in the City of London February 14, 2012.

Credit: Reuters/Olivia Harris

By David Milliken and Sven Egenter

LONDON | Thu Jul 5, 2012 3:54pm BST

(Reuters) - The Bank of England launched a third round of monetary stimulus on Thursday, saying it would restart its printing presses and buy 50 billion pounds of government bonds with newly created money to help the economy out of recession.

The BoE's action, coming just two months after it ended a previous asset buying programme, coincided with interest rate cuts in China and the euro zone as the trio of central banks took steps to counter a global economic slowdown.

There is no guarantee the new cash injection, which the bank linked directly to the worsening backdrop in the euro zone, will offer a major boost to an economy officially in recession since late last year.

BoE Governor Mervyn King has been adamant that gilt purchases still work as a stimulus.

But policymakers Martin Weale and deputy governor Paul Tucker as well as external economists have voiced doubts about the effectiveness of the latest round of purchases, though some in the market still forecast the four-month programme would be extended.

"We continue to have doubts over how successful extra QE will be, but seeing as the BoE has few other options we expect them to stick with it," said James Knightley at ING.

The BoE bought 125 billion pounds of gilts between October and April, calling a halt in May largely because inflation was falling more slowly than hoped towards its 2 percent target.

Since then, inflation has dropped to 2.8 percent, and the BoE said a worsening economic situation in the euro zone was the main factor behind its decision to restart purchases.

"Without additional monetary stimulus, it was more likely than not that inflation would undershoot the target in the medium term," King said in a letter to finance minister George Osborne explaining the decision.

The BoE has bought 325 billion pounds of government bonds to date, and the purchases announced on Thursday take this total to 375 billion.

Many economists had expected new programme to be spread over less than four months, and a minority had forecast the BoE would plan to buy 75 billion pounds of bonds.

Gilt futures, which had rallied in the run-up to the decision, fell by more than 30 ticks to hit a session low after the data.

"We continue to expect that QE will be expanded markedly further over time, reaching a total of about 500 billion pounds," said Citi economist Michael Saunders, who had expected an initial dose of 75 billion.

MONETARY POLICY STILL KEY

Britain's Conservative-Liberal Democrat coalition is largely reliant on the BoE to boost the economy because it has limited scope to cut taxes or raise spending while it tries to eliminate the country's big budget deficit over the next five years.

In a letter authorising Thursday's QE expansion, finance minister Osborne confirmed that monetary policy was the "primary tool" to deal with a worsening economic outlook.

However, many economists think gilt purchases are losing the effectiveness they had when they first started in March 2009.

"The BoE has been excessively optimistic about how powerful QE is," said Philip Rush, an economist at Nomura. "The latest increase is more than just a token, but it is not hugely significant for the outlook for growth and inflation."

Some BoE Monetary Policy Committee members have doubts too, and recommended at last month's meeting - when the committee split 5-4 against restarting QE - that other complementary policy measures might be better suited to reducing firms' and households' borrowing costs.

The QE stimulus follows joint measures announced by the government and BoE last month to improve the flow of credit to businesses, and to ensure banks do not suffer from a lack of ready cash if the euro zone crisis deepens.

The BoE says its purchases of government bonds help the economy by encouraging other investors to buy riskier assets instead, making it easier for large companies to raise funds through bond or share issues. But critics argue the BoE needs to do more to boost the flow of credit to smaller companies.

"The last round of QE proved ineffective, with little or no evidence it found its way to small businesses - the engine room of our economy," said Phillip Monks, chief executive of Aldermore, a recently established bank that lends to business.

"To really stimulate economic growth, the Bank of England needs to do more to ... ease credit availability for small firms."

With the possibility of interest rate cuts yet to enter the debate in Britain, both the European Central Bank and the People's Bank of China cut borrowing costs on Thursday.

http://uk.reuters.com/article/2012/07/05/uk-britain-boe-idUKBRE8630RO20120705?feedType=nl&feedName=uktopnewsmid

A UK Blue-Chip Starter Portfolio

Company	Industry	Share Price (Pence)	P/E	Yield (%)
HSBC	Financials	561	9.0	5.2
Royal Dutch Shell	Oil & Gas	2,225	7.6	5.0
BHP Billiton (LSE: BLT.L  )	Basic Materials	1,806	7.6	4.3
British American Tobacco	Consumer Goods	3,242	14.6	4.5
Tesco (LSE: TSCO.L  )	Consumer Services	310	8.8	5.0
GlaxoSmithKline	Health Care	1,447	11.4	5.3
Vodafone (LSE: VOD.L  )	Telecommunications	179	10.9	7.4
Rolls-Royce	Industrials	858	14.2	2.4
National Grid	Utilities	676	12.4	6.1
ARM Holdings	Technology	506	32.2	0.9

Excluding tech share ARM, the companies have an average P/E of 10.7 and an average yield of 5.0%. The numbers were 9.8 and 5.2%, respectively, when I last carried out this exercise in October 2011.

So, the group is rated a bit more highly today than it was nine months ago. However, I think it still veers towards the value end of the spectrum, because my rule of thumb for this group of nine is that an average P/E below 10 is firmly in "good value" territory, while a P/E above 14 starts to move toward expensive.

http://www.fool.com/investing/international/2012/07/04/a-blue-chip-starter-portfolio.aspx

Profits for the Long Run: Affirming the Case for Quality

Buying shares in decent, profitable businesses is a good way of minimising risk, and thereby maximising overall investing returns over the long run.

Chuck Joyce and Kimball Mayer:

"Put simply, profitability is the ultimate source of investment returns. [And] contrary to popular belief, profitability can be forecasted, and superior profitability persists. Investors systematically undervalue the unexciting stability of [such] quality stocks, except during times of financial crisis. Rather than being beholden to some black box model... we would argue that a fundamental focus on profitability remains the best way to minimize the true risk with which investors should be concerned."

Read more here:  Profits for the Long: Affirming the Case for Quality

With the passing of time, the benefi ts of low-risk investing have become more widely accepted.  Today, a wide array of low-risk strategies is now available.  

From profits, come dividends. And from dividends, come investors' incomes.


The market tends to mis-price such companies, seeing them as dull dividend machines, when it should be valuing them as dull, safe dividend machines.


Read more here: http://www.fool.co.uk/news/investing/2012/06/12/profits-for-the-long-run.aspx