The Intelligent Investor: The Definitive Book On Value part 48. The purpose of this book is to supply, in a form suitable for laymen, guidance in the adoption and execution of an investment policy. Comparatively little will be said here about the technique of analyzing securities; attention will be paid chiefly to investment principles and investors’ attitudes. We shall, however, provide a number of condensed comparisons of specific securities - chiefly in pairs appearing side by side in the New York Stock Exchange list in order to bring home in concrete fashion the important elements involved in specific choices of common stocks | 456 The Intelligent Investor published figures date only to 1961 in which year it earned 83 000 on revenues of 610 000. But eight years later on our comparison date its revenues had soared to million and its net to million. At that time the stock market s attitude toward this fine performer appeared nothing less than ecstatic. The price of 55 at the close of 1969 was more than 100 times the last reported 12months earnings which of course were the largest to date. The aggregate market value of 300 million for the stock issue was nearly 30 times the tangible assets behind the shares. This was almost unheard of in the annals of serious stock-market valuations. At that time IBM was selling at about 9 times and Xerox at 11 times book value. Our Table 18-4 sets forth in dollar figures and in ratios the extraordinary discrepancy in the comparative valuations of Block and Blue Bell. True Block showed twice the profitability of Blue Bell per dollar of capital and its percentage growth in earnings over the past five years from practically nothing was much higher. But as a stock enterprise Blue Bell was selling for less than one-third the total value of Block although Blue Bell was doing four times as much business earning 2 2 times as much for its stock had 5 times as much in tangible investment and gave nine times the dividend yield on the price. Indicated Conclusions An experienced analyst would have conceded great momentum to Block implying excellent prospects for future growth. He might have had some qualms about the dangers of serious competition in the income-tax-service field lured by the handsome return on capital realized by But mindful of the continued success of such outstanding companies as Avon Products in highly competitive areas he would have hesitated to predict a speedy flattening out of the Block growth curve. His chief Nearly 30 times is reflected in the entry of 2920 under Price book value in the Ratios section of Table 18-4. Graham would
