Groucho Marx and many other people bought stocks with
money borrowed against their --.
Siegel points out that it is important to remember that before the historic 1999 to 2000 surge in the NASDAQ, tech companies were viewed primarily as cyclical stocks with
some potential for long-term growth.
He looks for stocks with good earnings potential yet modest price-to-earnings ratios.
Currently, for example, the average stock has a price-to-sales ratio of 3:1, so O'Shaughnessy starts by screening for stocks with a ratio under 1.5:1.
Natural rubber stocks with
similar 300% modulus levels but varying scorch times were compounded.
Data going back to the 1930s shows conclusively that stocks with
low P/Es outperform stocks with
high P/Es over the long term in virtually every period analyzed.
Therefore, it is best to buy stocks with
a low P/E because there is potential for monetary growth.
While the general stock market P/E ratio (price divided by earnings per share) typically is between 14 and 18, disciplined value investors favor stocks with P/E ratios at significant discounts to the market's.
The 10 stocks with the highest dividend yields were assumed to be held in a portfolio for six months, and then the entire process was repeated every six months.
Buying stocks with
familiar names can help you teach your young children about the market.
S&P's Web site (www.personal wealth.com) provides information on investing in individual stocks with
good dividend records.