Graham and Dodd Method of Investing

Definition

Fundamental investment tactics founded by Benjamin Graham and David Dodd in the 1930s. They wrote about their strategy in a book entitled "Security Analysis." In it, the two advocate that investors should purchase stocks in corporations with undervalued assets because they will eventually reach true market value and give investors a positive return. Criteria that investors should look for in a company are: more current assets than current liabilities, all long-term debt, and selling at a low price/earnings ratio. The theory does not take into consideration the potential for earnings growth. Followers of this approach may also look for stocks selling below their liquidating value.

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