Looking Back at the DJIA in July 2008 – Throwback Thursday
In July 2008, I analyzed the Dow Jones Industrial Average (“DJIA”) to determine its overall valuation, and published the results here. Â Overall, the DJIA was valued at 14,872. Â On that day it closed at 11,397.56, which was about 75% of its value and right on the borderline of the ModernGraham margin of safety but leaning towards undervalued. Â Since then, it has risen to 16,424.85, a rise of 44%. Â But as I was looking through the archives to select a topic for this Throwback Thursday, I wondered how did the components that were rated well by the ModernGraham valuation model end up working out? Â Did they beat the DJIA? Â That’s what we’ll look at today.
The Table from 2008
The original post looked at only the components which qualified for either the Defensive Investor or the Enterprising Investor. Â The following table summarizes the valuations and prices at the time of each component:
| Ticker | Name | Value | Price | %Value |
| MMM | 3M | $107 | $69.77 | 65.4% |
| AA | Alcoa | $59 | $32.89 | 55.64% |
| T | AT&T | $34 | $30.68 | 90.85% |
| BAC | Bank of America | $36 | $28.16 | 77.96% |
| AIG | American International Group | $71 | $23.24 | 32.56% |
| BA | Boeing Corp | $86 | $62.64 | 72.81% |
| CVX | Chevron Corp | $216 | $82.62 | 38.24% |
| C | Citigroup | $18 | $16.95 | 94.38% |
| KO | Coca-Cola | $43 | $51.21 | 118.93% |
| XOM | Exxon-Mobil | $162 | $80.83 | 49.80% |
| GE | General Electric | $30 | $27.78 | 91.62% |
| HPQ | Hewlett-Packard | $54 | $43.22 | 80.48% |
| HD | Home Depot | $47 | $23.30 | 50.03% |
| INTC | Intel Corp | $21 | $21.64 | 100.98% |
| JNJ | Johnson & Johnson | $69 | $68.55 | 98.83% |
| MSFT | Microsoft | $35 | $25.52 | 72.40% |
| PFE | Pfizer | $19 | $18.42 | 96.74% |
| PG | Proctor & Gamble | $57 | $63.95 | 113.19% |
| VZ | Verizon | $27 | $33.79 | 125.33% |
| WMT | Walmart | $58 | $56.40 | 97.85% |
| DIS | Walt Disney | $46 | $30.60 | 66.21% |
The following companies were components at that time but are not included in the table, indicating they were deemed to be Speculative by the ModernGraham approach at the time:
- American Express (AXP)
- Caterpillar Inc. (CAT)
- E. I. du Pont de Nemours and Co. (DD)
- General Motors (GM)
- International Business Machines (IBM)
- JP Morgan Chase (JPM)
- McDonald’s (MCD)
- Merck & Co. (MRK)
- United Technologies (UTX)
The Undervalued Companies
Next, we will take a look at the companies deemed undervalued at the time and see how they have done since then. Â Overall, $10,000 invested in these 9 components would be worth $16,277.45, a gain of 62.77%. Â Clearly, that result would have been even better had AIG not been included.
| Ticker | Name | Value | Price Then | %Value | Price Now | Change |
| MMM | 3M | $107 | $69.77 | 65.40% | 136.77 | 96.03% |
| AA | Alcoa | $59 | $32.89 | 55.64% | 13.42 | -59.20% |
| AIG | American International Group | $71 | $464.80* | 32.56% | 50.39 | -89.16% |
| BA | Boeing Corp | $86 | $62.64 | 72.81% | 126.04 | 101.21% |
| CVX | Chevron Corp | $216 | $82.62 | 38.24% | 121.83 | 47.46% |
| XOM | Exxon-Mobil | $162 | $80.83 | 49.80% | 99.94 | 23.64% |
| HD | Home Depot | $47 | $23.30 | 50.03% | 76.58 | 228.67% |
| MSFT | Microsoft | $35 | $25.52 | 72.40% | 40.4 | 58.31% |
| DIS | Walt Disney | $46 | $30.60 | 66.21% | 78.95 | 158.01% |
*Adjusted for splits.
The Overvalued or Fairly Valued Companies
Now, take a look at the companies that were rated as overvalued or fairly valued at the time. Â Overall, $10,000 invested in these 12 components would be worth only $11,390.84 today, which is a gain of 13.91%.
| Ticker | Name | Value | Price | %Value | Price Now | Change |
| T | AT&T | $34 | $30.68 | 90.85% | 36.1 | 17.67% |
| BAC | Bank of America | $36 | $28.16 | 77.96% | 16.13 | -42.72% |
| C | Citigroup | $18 | $169.50* | 94.38% | 48.18 | -71.58% |
| KO | Coca-Cola | $43 | $25.61* | 118.93% | 40.59 | 58.49% |
| GE | General Electric | $30 | $27.78 | 91.62% | 26.12 | -5.98% |
| HPQ | Hewlett-Packard | $54 | $43.22 | 80.48% | 32.49 | -24.83% |
| INTC | Intel Corp | $21 | $21.64 | 100.98% | 26.93 | 24.45% |
| JNJ | Johnson & Johnson | $69 | $68.55 | 98.83% | 98.75 | 44.06% |
| PFE | Pfizer | $19 | $18.42 | 96.74% | 30.09 | 63.36% |
| PG | Proctor & Gamble | $57 | $63.95 | 113.19% | 81.65 | 27.68% |
| VZ | Verizon | $27 | $33.79 | 125.33% | 47.1 | 39.39% |
| WMT | Walmart | $58 | $56.40 | 97.85% | 77.22 | 36.91% |
*Adjusted for splits.
The Speculative Companies
Taking a look at the companies deemed to be unsuitable for either the Defensive Investor or the Enterprising Investor, we see that one of them declared bankruptcy, General Motors, and $10,000 invested in these 9 components would have been worth $14,950.44, a gain of 49.50%.
| Ticker | Name | Price Then | Price Now | Change |
| AXP | American Express Company | 37.52 | 87.4 | 132.94% |
| CAT | Caterpillar Inc. | 70.99 | 102.93 | 44.99% |
| DD | E I Du Pont De Nemours And Co | 43.56 | 67.72 | 55.46% |
| GM | General Motors Company | Declared Bankruptcy == 0 value | -100.00% | |
| IBM | International Business Machines Corp. | 127.66 | 196.4 | 53.85% |
| JPM | JPMorgan Chase & Co. | 40.75 | 55.26 | 35.61% |
| MCD | McDonald’s Corporation | 59.7 | 100.83 | 68.89% |
| MRK | Merck & Co., Inc. | 32.41 | 56.26 | 73.59% |
| UTX | United Technologies Corporation | 65.52 | 118.07 | 80.20% |
Conclusion
| Approach | Gain |
| DJIA as a whole | 44% |
| Undervalued | 63% |
| Overvalued or Fairly Valued | 14% |
| Speculative | 50% |
The companies rated as Undervalued and suitable for either the Defensive Investor or the Enterprising Investor significantly outperformed the alternatives.
Going Forward – How to Use this Information
One way to use this information going forward would be to follow along with the ModernGraham valuations through signing up for the free daily email list (and receive a free copy of the March 2014 issue of MG Stocks & Screens when you do), or by becoming a premium member and utilizing the MG Stocks & Screens monthly report.  Stocks & Screens lists all of the companies valued by ModernGraham and screens them to find the companies that are suitable for Defensive Investors or Enterprising Investors and undervalued.
Disclosure: Â The author held a long position in DIS, and HD but no other companies at the time of publication and had no intention of changing that position in the next 72 hours.
