Investors Should Not Pay More Than A 15 P/E Ratio When Buying A Stock: Ben Graham | FAST Graphs

Value is hard to come by these days. Market has gotten ahead of itself and we're going back to extreme greed. But there still are some opportunities overlooked by the marke and your tool is amazing to find them, Chuck.

Incredible video, thank you for another insightful video, Chuck... The wisdom of Benjamin G, Buffett and Munger will always live on through the best of all of us... You've knocked this one out of the park with this explanation, sometimes it really does require some waiting to find a value stock to add to the portfolio below p.e 15, but when there is an opportunity... investors better put their money to good use!

Thanks Chuck! I always find your videos informative and enjoyable.

To sum up: Buy above average businesses, for below average prices.

Depends on ROIC, growth, runway for future growth, size of company. Earnings can be distorted by high rates of reinvestment for example, which is basically positive for compounding, especially when the company is less expensive based on cash flow.

Thank you for your content, you are an excellent teacher

Hi Chuck, It sounds like your audio is coming through your webcam's microphone and not your dedicated mic in front of your mouth. Either that or you might want to test the settings on your mic. Your earlier videos have clear audio with a warmer tone.

Thanks Chuck-I learned a lot from this segment about P/E ratio and valuations.

Thanks Chuck! Joel Greenblatt once did a speech where he referenced Ben Graham’s view on intrinsic value calling it a wavy line, and that if you do majority of buying below the line and majority of selling above the line you will do well

I try to point out this to some of my friends...sad that they dont understand it yet. Does not help that, here in Portugal, barely no one invests - and the few who do have no concept of value investing. Thank you for your Work!

Great video. I've always wondered what P/E = G means on FastGraphs. Now I think I finally get it. It means that ordinarily one would have a default of 15 as the standard P/E, below which is a buy, but with fast growing companies the P/E would rise to match the growth rate if above 15% EPS growth. Correct? To be honest I don't think the current explanatory box that comes up when the cursor pauses on that really explains this in plain English!

Once again, fantastic content!!

Chuck you are the best!

I think the 15 PE ratio is grounded on financial math rather than on historical market PE ratio. PE ratio implies a 6.7% rate of return (1/15) plus growth by inflation of 3% it's a 9-10% total return which is the historical return of the stock market. Which makes sense considering that US treasuries yielded on average 5%, so the stock market risk premium is 4% or 5% percentage points over the theoretically safest investment which is t-bills. I am not sure why the stock market risk premium has been around 4-5% though, but I am sure there is also some rational mathematical explanation.

you are delivering an absolute masterclass. I am grateful for your videos and lessons and tool, you have helped many people. you should make people pay for these lessons

Hey Chuck! Great video as always. Slightly OT question. I feel that the sound quality has been a bit off sometimes lately. This video and the last one (Food Stocks) sounds like they are recorded in a bathroom (ringing short echo) while the one just before them (Office REITs) sound just fine. I didn´t go back that far, but it seems to have started with the Packaged Food video from a month ago. Anyway, no big deal, just thought you should know. Cheers

Thank you once again for great vid.👍

But you also have to subtract inflation from the expected return. Right? How would you do that?

Thank you, Professor! 😃

Hi Chuck: Love your work. Question: In “What works on Wall Street” O'Shaughnessy's research showed that Price to Book is a better valuation metric, even better is Price to Sales, than P/E (Earnings can be manipulated by the CFO.) Also I would also think that the best P/E metric would differ among industries, 15 might not be the best for all. (Obviously the closer I could get P/B to 1 - I would really have a bargain, amazingly EPD did get fairly close during Covid.) Your thoughts would be welcome. Thanks for all the great work