Trouncing the Dow: A Value-Based Method for Making Huge Profits in the Stock Market

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Summary: Trouncing the Dow Big Time in 2000
Review: FYI...the benchmark investing strategy introduced in Trouncing the Dow is living up to its reputation thus far in 2000. While the Dow Jones Industrial average is under water, benchmark investing is up 18% including dividends year-to-date.

Isn't it nice to see something that continues to live up to its promise? The hardest part of earning those gains this year would have been to invest in down-and-out "value" stocks while the high-fliers in the Nasdaq were enjoying such staggering gains. Oh yeah, the Nasdaq is under water in 2000, too.

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Summary: Every Serious Investor Should Read This Book
Review: I found this book very thought provoking which is good. But, I checked out the test figures that he has in the back of the book with information found in the latest Value Line and the numbers don't jive. The author gives test figures for the reader to use so that they can make sure they are doing the math correctly. When I compared those figures with the actual figures in Value Line, they were inconsistent. For someone like myself who is not all that great at math to begin with, I need as much guidance and clarity as I can find. The author throws out terms but not all of them are clearly defined, this does not help when attemtpting to do complicated math equations. He would have been better off showing a copy of the Value Line pages that he mentions then highlight each area within that page as it relates to the terms he is using. Return on Equity, Book Value, Current Book Value, etc. mean nothing to me if I don't know where they are located on the Value Line page.

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Summary: Good mechanical investing technique
Review: Ken's book is a quick read and discloses a fairly simple mechanical stock valuation method that appears to have significantly outperformed the DJIA over the years. The in depth discussion of the history of each Dow stock is useful although somewhat boring to anyone but a real blue chip fanatic. There are two irritating limitations to the method in the book, namely there is no guidance on when to sell, i.e. when a stock becomes too overvalued and should be rotated into a new stock. The other flaw is that the 10-year average price/book is calculated incorrectly. However the method is the method and if it works, it works! Calculating the average P/B correctly merely has the effect of giving lower (more conservative) target buy prices for high growth stocks. Using this method as a screening tool for large cap value stocks is a useful investment tool to have, and keeping the above limitations in mind, the book is well worth having.

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Summary: Excellent, easy to read conservative investing strategy.
Review: Kenneth Lee's new book, "Trouncing the Dow" is an easy to read, new, conservative investing strategy based on purchasing only those stocks that are trading below their downside target prices. I found this book to be refreshing and practical. Mr. Lee takes readers through his "Benchmark Investing Formula", a seven step process, to arrive at a stock's historical average return on equity for the past ten years. The idea is to purchase stocks trading near or below their past ten year average. In a market that many analysts and investors consider overvalued, Mr. Lee shows readers how to avoid the overvalued stocks and select stocks where the downside risk is low. Mr. Lee goes through his formula with detailed examples, talks about exceptions to the rules and gives a lot of historical data to support his strategy. Mr. Lee's stock picking strategy appears to be sound and logical and is supported by solid data. It's a conservative approach which should be appealing to long term investors trying to increase returns while minimizing risk. I highly recommend this book to serious investors.

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Summary: Great book
Review: Reading TTD, after reading other books on 'Value Investing' I actually found a strategy that I could use. I have been a student of finance over 30 years and have read other books, and this book gave me 'the tools' to evaluate a companies a companies potential.

I can't say that this book will teach you everything, but it does a very good job of teaching you the basics. Though 'value investing' is not in favor for the current times, I do believe it is the most sensible approach to evaluate a company, and over the long term will prove to be a better approach then chasing the 'whats hot on wall street' method.

If you are a conservative invester, read this book. If you are an aggressive investor, looking for returns of 30% or more(every year), good luck.

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Summary: A 2003 Review
Review: The 10 most undervalued stocks selected by benchmark investing (as taught in my book) from the S&P 100 averaged 51.20 percent in 2003 versus 23.84 percent for the index itself. The top five picks performed even better, up an average 80.82 percent.

Obviously, 2003 was a good year for stocks. But had you used benchmark investing beginning in 2000 until the end of last year, and bought the 10 most undervalued stocks from the S&P 100 you would have enjoyed a compounded total average return of 8.71 percent. During the same period, the index lost an average of -7.69 percent a year. So, you might want to take a look at benchmark investing in this book.

P.S. I do NOT have any web sites on the net, so don't assume I'm involved with any of them.

Rating:
Summary: A 2003 Review
Review: The 10 most undervalued stocks selected by benchmark investing (as taught in my book) from the S&P 100 averaged 51.20 percent in 2003 versus 23.84 percent for the index itself. The top five picks performed even better, up an average 80.82 percent.

Obviously, 2003 was a good year for stocks. But had you used benchmark investing beginning in 2000 until the end of last year, and bought the 10 most undervalued stocks from the S&P 100 you would have enjoyed a compounded total average return of 8.71 percent. During the same period, the index lost an average of -7.69 percent a year. So, you might want to take a look at benchmark investing in this book.

P.S. I do NOT have any web sites on the net, so don't assume I'm involved with any of them.

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Summary: A Different Angle On Betting Dow Value
Review: The 1990's have brought a striking popularity in books that promise outsize returns based on simple formulas. The most obvious example of the genre is the Dow Dogs strategy. Made popular by Michael O'Higgins and Jim O'Shaughnessy, among others, underperformance in recent years has done little to dampen investor enthusiasm.

Kenneth Lee's Trouncing The Dow offers a new twist on betting the undervalued Dow stocks theory. Employing a methodology he dubs benchmark investing, Lee seeks to establish price ranges using historical return on equity and price/book value figures. Once established these price ranges are used to establish concrete reference points the investor can use to consistently focus on undervalued stocks. The book has tables of the calculations from 1973-96, allowing those so inclined to compare current valuations with past Dow results under most market conditions. The process also forces the reader to dig into a company's fundamentals and get a feel for how it has been priced in the past.

The appeal here is obvious. A concise method for divining value on a select group of non-volatile stocks where information is readily available. (Lee suggests using The Value Line Investment Survey). The mechanical process eliminates emotion from the equation, allowing the reader to use history as a guide when uncertainty has gripped the market. The fact that Lee stresses low turnover, eschews market timing, and adheres to popular value tenets puts the ideas here on the same wavelength as studies produced recently in books by Jeremy Siegel and Jim O'Shaughnessy. Personally however, when I see strategies based on Dow stocks I tend to want to see computer studies based on similar stocks. I want to see large samples. They give the picture texture and background, they help point out any possible flaws or reasons for concern. Back testing has its limitations. Early on Lee states he originally developed the formula employing the Value Line universe on a computer. In fact, the current configuration of Value Line's electronic product makes Lee's process relatively easy to implement on a broad scale. To include summaries of the results of that data would have added considerable weight to his argument.

It seems to me that the real question here is whether anomalies pointed out here and popularized by O'Higgins and others will continue to outperform. Indeed, many of the ideas here overlap with popular titles of the last few years. Is the Wall Street establishment so short-term focused that long-term value plays based on simple rules offer an easy short cut? Though many would like to deny it, there is enough efficiency in the United States equity markets to make outperformance a relatively difficult task. Though the idea of "beating the experts" without complex strategies makes a cute media story, it continues to be a tall order.

In Trouncing The Dow, Lee makes the case it can be done. The book is a quick read and offers a formula that anyone can employ to make up his or her own mind.

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Summary: Interesting...but I see some major flaws....
Review: While this book seems to have a technique for 'trouncing the dow', the vast majority of the book is just filler that gives very little insight into the methodology. The whole idea takes less than one small chapter, and leaves many questions unanswered. I was very disappointed.