The Intelligent Investor: The Definitive Book On Value part 50. 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 | 476 Commentary on Chapter 18 FIGURE 18-1 Cisco vs. Sysco 2000 2001 2002 Cisco Total return Net earnings millions 2 668 -1 014 1 893 Sysco Total return Net earnings millions 446 597 680 Note Total returns for calendar year net earnings for fiscal year. Source a gain in five trading days. Yahoo kept whooping along through year-end closing at on December 31. In a single month the stock had more than doubled gaining roughly 58 billion to reach a total market value of 114 In the previous four quarters Yahoo had racked up 433 million in revenues and million in net income. So Yahoo s stock was now priced at 263 times revenues and 3 264 times earnings. Remember that a P E ratio much above 25 made Graham grimace 5 Why was Yahoo screaming upward After the market closed on November 30 Standard Poor s announced that it would add Yahoo to its S P 500 index as of December 7. That would make Yahoo a compulsory holding for index funds and other big investors-and that sudden rise in demand was sure to drive the stock even higher at least temporarily. With some 90 of Yahoo s stock locked up in the hands of employees venture-capital firms and other restricted holders just a fraction of its shares could trade. So thousands of people bought the stock only because they knew other people would have to buy it-and price was no object. 4 Yahoo s stock split two-for-one in February 2000 the share prices given here are not adjusted for that split in order to show the levels the stock actually traded at. But Yahoo s percentage return and market value as cited here do reflect the split. 5 Counting the effect of acquisitions Yahoo s revenues were 464 million. Graham criticizes high P E ratios in among other places Chapters 7 and 11. Commentary on Chapter 18 477 Meanwhile Yum went begging. A former division of PepsiCo that runs thousands of Kentucky Fried Chicken Pizza Hut and Taco Bell eateries Yum had produced 8 .
