Peter Cundill Magic Sixes

[paullow]

Hi fellow buddies,

I happened to chance upon this book recently. It's title is " there is always something to do" by Peter Cundill, who passed away in 2007.

In essence, he was a famous fund manager who came out with this approach. He was able to reap at least 15% for the 33years he was fund manager.

buy at 0.6 book value, PE 6, Dividend 6

-provide a safety margin for a company with decent earning that also distribute a reasonable yield back to investors.

Does anyone have any views on this or any comments?

[psolhawk]

Granted, PB and PE offer some measure of margin of safety. I tend to disagree with Dividend (6 or not) as I am currently focused on small caps that are turning around and who do not issue dividend due to their current requirement for business expansion. A narrow scope of focus on dividend (>6%) may cause investors to lose sight of such companies. Even my PE may hit a little high on the side of 10 but with a view of future streams of income, I will still commit myself to such a promising stock that is not within the radar of most investors. PB, as mentioned by d.o.g., often includes PPE and Inventories (which can very often be worthless). I will dissect PPE to take out the freehold land and properties, calcuate the sum of cash and properties minus loans as my book value for a wider margin of safety. My view is that fund managers require general screening tools that cannot offer as much details as reading the finanical reports personally and dissecting every point carefully.