Thank you to Eric Ahab for your comment. Glad to hear you’re enjoying the site.
David had a number of questions about our post regarding our valuation method. First, we did record the buy and sell transactions that occurred during back-testing and that helped us determine the additional amount of profit that would have been seen in our test. Second, we are currently using Google Docs’ spreadsheet for our calculations. I wasn’t aware of the tool that is available through Yahoo! Groups. Thanks for the information. For our readers, here is the link to a great tool for importing data into excel. Though we can’t currently use it, it does appear to be extremely useful.
David also asked if we also incorporate Graham’s Interpretation of Financial Statements into our work. We are sorry to say that we have yet to read that great work of Graham. However, we have all taken numerous courses on financial statements that were based on many of the things that Graham taught originally. As far as Hewitt Heiserman’s It’s Earnings that Count, we have actually had some conversations with Mr. Heiserman concerning his book and have been impressed by his work. With your skittishness, just be sure to continue to do what you’re doing: keep learning as much as you can about investing and it will become easier. That said, the bad news is that when it’s your own real money involved, I find that every purchase is still met with skepticism and nervousness.
Pete W asked why we don’t use a formula found in Security Analysis. The short answer, is that we weren’t aware of a formula in the book – I looked through the chapter you mentioned but was unable to find what you are referring to. Our formula comes from Chapter 11 of The Intelligent Investor – page 295 of the 2006 updated edition.
If you have a question for us, please email me at ben@moderngraham.com or leave a comment anywhere on the site (preferably on this post).
My edition of “Security Analysis” is the “Classic 1951 Edition”. On p.454, which is the first page of chapter 36, the formula for value is given as: [ V = M(D+(E/3)) + net asset values] where V=value, M= earnings multiple, D=dividend, and E= earnings. I recognize the formula that you are using but I prefer this one and I am wondering as to what the think of the difference between the two.