Investment Advice: Is the Cabot Benjamin Graham Value Investor Right for You?

By Timothy Lutts, Chief Investment Strategist
For Cabot Wealth Advisory 

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There are a lot of places you can get investment advice: from TV, books, your barber, your brother-in-law, your psychic—the list goes on and on. But at Cabot, we think that the best place to get investment advice is from other successful investors.

Cabot Benjamin Graham Value Investor is based on the teachings, naturally, of Benjamin Graham. He's the fellow who taught Warren Buffet about value investing back at Columbia University. Another student of Graham was Wilson Payne, who earned a doctorate and became a teacher at Babson College ... where he taught J. Royden Ward. Eventually, Dr. Payne and Roy Ward teamed up to turn the Graham system into a computer program.

Throughout the '70s, '80s and '90s, Roy used this system in his investing work, growing increasingly comfortable with it. Having found a system that not only works but also suits his personality, there was no reason to change. In that regard, Roy is a paragon, a perfect example to emulate.

In 2003, Roy joined the Cabot family, adding this long-established value investing system to our stable of growth-oriented letters so that thousands of investors worldwide could benefit from his system.

Now, technically, anyone could reproduce this system; after all, Benjamin Graham's teachings are well known; he wrote two great books detailing his methods. But practically, I've got to say it's a bear of a job. For each stock in his universe, Roy tracks 44 separate items that size up the company using four separate sets of factors, Quality, Value, Growth and Technical.

Quality encompasses measures like Current Ratio, Earnings Stability and Price Growth Stability.

Value tracks items like PE ratio, Historical Price/Book Value relative to Current Price/Book Value, and Historical Price/Dividend Ratio versus Current Price/Dividend Ratio.

Growth looks at things like 5- and 10-year Historical Revenue Growth Trends, Quarterly Earnings Acceleration and 5-year Projected Cash Flow.

Technical measures things like Relative Strength, Price Stability and Industry Strength.

And there are 32 more items! But you don't need to worry about those details, because Roy does all the work and presents the results, each month, in a 12-page letter that tells you in plain English what to buy and why.

Benjamin Graham's system is very big on keeping risk low. You only buy a stock when it's below its Maximum Buy Price. And you don't sell a stock until it reaches its Minimum Sell Price.

The result? For nearly 80 years, through Benjamin Graham, then Warren Buffet, Wilson Payne and now Roy Ward, this system has delivered an annualized return of 20% in almost every kind of market.

Admittedly, there are more exciting ways to invest, and Cabot has advisories that can satisfy thrill-seekers as well. But, if you like the idea of buying low and calmly hanging on; if you like the thought of going on a cruise and not worrying about being out of touch with the market for days at time while your stocks appreciate; and if you like the "low risk" that comes from buying stocks when they're dirt cheap, I'm guessing Cabot Benjamin Graham Value Investor is the advisory that's right for you.

More information on Cabot Benjamin Graham Value Investor
How Cabot Applies the Benjamin Graham Value Strategy
Guide to Value Investing with the Cabot Benjamin Graham Value Investor
Step-by-Step Guide to Investing with the Cabot Benjamin Graham Value Investor
Success Stories from the Cabot Benjamin Graham Value Investor

Stock Picks

Tesla Motors

If Tesla ever begins to cut back on development and innovation costs, earnings will soar.


China seems to be raising up its very own version of Amazon in Alibaba (BABA.


Roy Ward uses the PEG ratio to determine if the stock is undervalued or overvalued.

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