Graham Stock Picking Put to the Test

I got lucky to find this entry over at The Stingy Investor.

It is a great follow-up to our very first entry as it outlines examples and practicality of Benjamin Graham's tenets of value investing.

Over the past five years I've used Benjamin Graham's time-tested strategy for defensive investors to uncover undervalued U.S. stocks. So far, the results have been breathtaking.

The performance of each year's Graham stocks, the performance of the S&P500 (as tracked by the SPY exchange-traded fund) and the difference between the two is shown in Table 1. You can see that the Graham stocks have solidly beaten the S&P500 each year*. In fact, an investor who bought each year's Graham stocks, sold, and then bought the next crop of stocks would have gained 369% (or 38% annually**) whereas a buy and hold investment in SPY units would have actually lost 5%.

In fact, The Stingy Investor has a whole "category" set up for Benjamin Graham-related entries and you can read a lot of related material by clicking here.

If you want a more detailed, mathematical review and discussion of this investment style you can click here for a study.