It's Difficult to Go Wrong with This 25:25:25:25 Ratio - Views on News from Equitymaster

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The Equitymaster Research Digest

It's Difficult to Go Wrong with This 25:25:25:25 Ratio
Aug 2, 2016

  • Our heroes
  • Holding cash is an investing strategy
  • What kind of traders go on TV?

My co-head of research, Rahul Shah, likes to remind the team of this old Buffett quote...

  • Tell me who your heroes are and I'll tell you how you'll turn out to be.

At Equitymaster, we believe it's important to lay out exactly who our heroes are. But unlike Buffett, who once said he's '15% Fisher and 85% Benjamin Graham', we cast a wider net.

Buffett today is much more than the '15%Fisher' he claimed to be. It was the influence of Charlie Munger that moved him away from deep bargains to company quality.

Restricting yourself to just one stock selection method may not help across markets. But you'll need to know when to change strategy and why.

We know for a fact that Benjamin Graham's principles are as relevant today as they were almost seven decades back. So the initial quartile (25%) of our stock selection process - our basic stock screener - is based on his simple mathematical formulae.

But we know this screen only throws up buying opportunities once in a while. And as Buffett has complained, many quality businesses that are trading relatively higher may get filtered out. So we combine the Graham screen with Buffett's quality criteria and look for moats.

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