In his book, the great guru, Benjamin Graham argues that the value of the investment strategy, buying stocks can be made to identify undervalued based on just a few simple principles and criteria. Some of his criteria for selecting projects for undervalued stocks to be interpreted and simplified below: -

1. First, the investor must ensure that the stock price is less than two-thirds of tangible book value of the action. Tangible book value is the value of total assets of the company minus total liabilities.

2. The investor must also ensure that the stock price is less than two thirds of the net assets of the Company. Net current assets are assets of the company, which can be instantly converted into cash, minus total liabilities of the company.

3. Third, ensure that the total debt less than tangible book value. The rule is that the current ratio, current assets divided by current liabilities must be greater than two.

4. Investors should check and ensure that the historical returns for the price is higher than the returns. The company also has a history of stable income.

5. The profit of the company must show a rising trend and the profits should have doubled in the last decade.

6. Another criterion is to ensure that the dividend yield on the company, at least two thirds of the returns is.

Historical records showed that many fund managers were from the strategy of value investing, Benjamin Graham as defined and so many glowing tribute to well-known successful investor, have benefited including the largest investor of all time Warren Buffet to this investment strategy.

Therefore, there is no doubt that we identify ourselves to the above principles to this important capability, research and undervalued stocks, to raise purchase to purchase. Needless to say, by applying this proven investment strategy is the probability of success by taking advantage of the scholarship certainly encouraged.

It is so important these days to ensure that we are educated in financial planning and investment strategies. Check out Jeremy’s blog, Financial Planning & Investment Guide for more value information on this subject.

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