"You've got to be very careful if you don't know where you're going, because
you might not get there." Yogi Berra

*THE FOLLOWING MATERIAL REPRESENTS SOME OF THE GUIDELINES OF
BENJAMIN GRAHAM AS MODIFIED BY THE WEBMASTER DUE TO FEAR.

Each company should have a long record of continuous dividend Payments: at
least 10 years; 20 years is better.

Graham: Limit purchases to 25x of 10 year average earnings, and not more than
20 times 12 month average earnings. [Webmaster: I'm much more comfortable
limiting my purchases to stocks with current P/E < 15]

Reevaluate your portfolio every 12 months or more frequently. Make sure that
the balance sheets of your companies are still sound.

Graham: Industrial company common stock book value should be 50% minimum of
total capitalization, including all bank debt. [Webmaster: I'm much more
comfortable with 33% or less debt/capitalization, especially during times when its
difficult to get funding.]

Graham: Railroad or public utility common stock book value should be at least
30% of total capitalization. [Webmaster: again, this does not seem safe in my
opinion].

Prominent Company = should rank among the first quarter or first third
in size within its industry group.

For "enterprising investor", avoid "growth-stocks" indicated by P/E higher than
20. For the "defensive investor" avoid stocks with 25 x average earnings of the
past seven years. These should be about equal in both cases. [Webmaster: I
avoid these completely, except in my nano-speculator portfolio].

Graham: Large well run companies are advantageous because they have financial
and personal capital to make it through bad times back to profitability and market
price will respond rapidly to recovery. [Webmaster: This is for "warm-fuzzies"
only since we really don't care about the market price of the stocks once we buy
them, unless of course their balance sheets start looking dicey].

"Bargain" = calculated value at least 50% more than the price.

Earnings stability over past decade or more (no annual deficit) required.

Ideal: Large and prominent company selling well below its past average price and
its past average price/earnings multiplier. [Webmaster: and in compliance with
other requirements as well.]

Defensive Investor Always Avoids: foreign bonds, ordinary preferred stocks,
secondary common stocks, IPO's. Enterprising Investor only buys these when
selling price is less than 2/3 of real value.

High-grade bonds with maturity of seven years or are safe due to lack of price
changes.

Avoid issues selling at prices more than 33% of tangible asset value.

Sound investment require combination of good asset price, good P/E, good
balance sheet and reasonable evidence that this will continue indefinitely.

Standards of before tax earnings vs. fixed charges for:

Bonds:
Utility > 4x of 7 year avg earnings or 3x poorest year
Rail > 5x of 7 year avg earnings or 4x poorest year
Industrial > 7x of 7 year avg earnings or 4x poorest year
Retail > 5x of 7 year avg earnings or 4x poorest year

Preferred Stocks (NOT of: utilities, financials, or RE): The same minimum figures
but add 2x preferred dividends

Current Dividend Rate: Standard dividend policy= distribution of about two-thirds
of their average earnings. Typical secondary company with expected average
earnings of $3 and an expected dividend of $2 may be valued at either 12 times
its earnings or 18 times its dividend, to yield a value of 36 in both cases.

Graham: Big companies only: > $100 million of annual sales for an industrial
company and, > $50 million of total assets for a public utility. [Webmaster: This
will be a lot higher since Graham said this in the 1970's.]

Strong Balance Sheet: Industrial companies = current assets > 2x current
liabilities (two-to-one current ratio). Long-term debt should not exceed the net
current assets (or "working capital"). For public utilities the debt should not
exceed twice the stock equity (at book value). [Webmaster: I'm still confused
about this as I don't see this criteria often met.]

Earnings Growth: > 33% increase in EPS in past 10 years based on 3 year
averages.

P/E < 15x past 3 years EPS.

P/B < 1.5x but P/E < 15 = higher P/B such that P/E * P/B < 22.5
(especially good for defensive investors)

Portfolio E/P> high-grade bond rate.

[Webmaster: I've omitted much of the criteria for the "enterprising investor" as it
is a less stringent criteria of the "defensive investor's" and does not seem as
safe.]

ROIC = how efficiently a company has used the retained shareholders' money;
10% is good; 6% or 7% ok if the company has good brands, good management,
and temporarily out of favor.

"Only The Paranoid Survive!" Grove