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It's nonsensical to derive a price/earnings ratio by dividing the known current price by unknown future earnings.

Benjamin Graham

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Benjamin Graham
Age: 82 †
Born: 1894
Born: May 8
Died: 1976
Died: September 21
Economist
Financier
Investor
University Teacher
Writer
London
England
Unknown
Nonsensical
Currents
Ratio
Investing
Earnings
Price
Ratios
Known
Derive
Future
Dividing
Earning
Current

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If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.
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Successful investing professionals are disciplined and consistent and they think a great deal about what they do and how they do it.
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Though business conditions may change, corporations and securities may change, and financial institutions and regulations may change, human nature remains the same. Thus the important and difficult part of sound investment, which hinges upon the investor's own temperament and attitude, is not much affected by the passing years.
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Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble... to give way to hope, fear and greed.
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Experience teaches that the time to buy stocks is when their price is unduly depressed by temporary adversity. In other words, they should be bought on a bargain basis or not at all.
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It always seemed, and still seems, ridiculously simple to say that if one can acquire a diversified group of common stocks at a price less than the applicable net current assets alone - after deducting all prior claims, and counting as zero the fixed and other assets - the results should be quite satisfactory.
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Price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal.
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The thing that I have been emphasizing in my own work for the last few years has been the group approach. To try to buy groups of stocks that meet some simple criterion for being undervalued-regardless of the industry and with very little attention to the individual company.
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Do not let anyone else run your business
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Always buy your straw hats in the Winter
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Avoid second-quality issues in making up a portfolio unless they are demonstrable bargains.
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In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.
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It should be remembered that a decline of 50% fully offsets a preceding advance of 100%.
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An intelligent investor gets satisfaction from the thought that his operations are exactly opposite to those of the crowd.
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I am more and more impressed with the possibilities of history's repeating itself on many different counts. You don't get very far in Wall Street with the simple, convenient conclusion that a given level of prices is not too high.
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The intelligent investor should recognize that market panics can create great prices for good companies and good prices for great companies.
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The beauty of periodic rebalancing is that it forces you to base your investing decisions on a simple, objective standard.
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In an ideal world, the intelligent investor would hold stocks only when they are cheap and sell them when they become overpriced, then duck into the bunker of bonds and cash until stocks again become cheap enough to buy.
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Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of good business conditions. The purchasers view the good current earnings as equivalent to 'earning power' and assume that prosperity is equivalent to safety.
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Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it – even though others may hesitate or differ.
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