Buy What you Know: A Recipe for Investing in Tough Markets

Lightbulb Buy What you Know: A Recipe for Investing in Tough Markets
“Buy what you know”, this quote first coined by Peter Lynch has been interpreted a number of different ways throughout the years. I am going to add to that list and suggest there is a way to interpret it in this economy and secure your investments.

During the stock market crash of 1929 almost all companies plummeted, but some investors still profited by picking companies that could make money in the economy of the day. If some of the dire predication about how long the current recession will continue are correct we may be entering a similar phase. So what companies are setup to make money when times are tough? Companies that serve our core human needs.
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Buy on the Cheap (Price/Earnings) (Session2)

accounting dollar sign Buy on the Cheap (Price/Earnings) (Session2)To follow up our Graham intro we will investigate Graham’s first insurance technique of buying on the cheap. Graham used a number of ratios to determine if a company is cheap. The first ratio we need to look at is the Price/Earnings ratio.
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Graham Security Analysis (Session 1)

Benjamin Graham 471e111496a6d Graham Security Analysis (Session 1) Benjamin Graham had a great investment philosophy. Find great companies determine their intrinsic value and then only buy them when they are cheap. Or as Graham puts it:

apply a set of standards to each purchase, to make sure that he obtains (1) a minimum of quality in the past performance and current financial position of the company, and also (2) a minimum of quantity in terms of earnings and assets per dollar of price.

The Intelligent Investor P347-348 Harper Collins Edition 2003
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