More Rule #1 Investor - Can’t Find Anything That Meets the Criteria

Written by The Dividend Guy on May 7, 2006

As I discussed in an earlier post, I finished reading Rule #1. Because I love everything to do with investing, I have been testing out the strategy to see what I could come up with in terms of recommendations. So far, I have not found one stock that meets the standards as set out by Phil Town in the methodology he writes about. Mind you, I have not examined a huge number of stocks but enough to wonder when it would happen that I would find one.

The stocks I examined have been: WMT, HD, KO, PEP, BBBY, AEOS, ANF. Both KO and PEP had growth rates that were to low to warrant going further, and all the others stock prices were too high and did not meet the margin of safety requirements.

Upon reflection, I guess that is the whole point of the process - to find stocks that the market is undervaluing based on some combination of past performance and future potential. It will not be easy to find that stock because of all the other investors (i.e. brokerages, mutual funds, etc) that are identifying these stocks first. However, I am confident that if I keep digging I will find one. I will let you know when I do (after I buy it of course!!).


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7 Comments so far

  1. yielder May 8, 2006 5:15 am

    “Achieve a guaranteed 15% or better rate of return on your investments

    Whether you’re a nurse, a cook, a semi-retired teacher… your age and experience don’t matter. The Rule is simple to follow and takes just 15 minutes of your time every week — leaving you plenty of time to live your life!”

    A guarantee? Only 15 minutes every week? Gimme a break. Ask to see his brokerage statements for the past 5 years.

  2. The Dividend Guy May 8, 2006 12:23 pm

    Yielder, you are totally right. My “investigation” into his strategy appears to be taking way more than 15 minutes per week and I am about ready to go give up his ‘”strategy”. There seems to be a trend right now (coincedental with a rising market??) of the get rich quick on the stock market books. It does not happen quick!!

  3. Geoff Gannon May 9, 2006 5:53 pm

    I like the basic premise, but I agree the 15 minutes a week claim is more marketing than anything else. To be fair, the list of stocks you looked at is not exactly a list of very cheap stocks. Although, I’m not sure how many quality companies there are selling at cheap prices in today’s market.

  4. yielder May 11, 2006 8:09 am

    >I’m not sure how many quality companies there are selling at cheap prices in today’s market.

    There are some a few names - http://i3.tinypic.com/xpd9×5.jpg

  5. yielder May 11, 2006 8:12 am

    For some reason, the link is being distorted when you click on it so cut and paste instead.

    Mike

  6. Doug Pedersen May 21, 2006 6:30 pm

    Actually, based on your summary of the book (I haven’t read it) I think his approach is great - but it proves that there are relatively few great investments, which is why I try and hold only a few stocks.

    The 15 minutes claim is BS though, because if investing were so easy, everyone would be rich. Investing is hard work, at least, if you want to find the very best investments. It may not require very much market watching, but it sure requires lots and lots of deep research into great busiensses.

    If you are looking for a business that might meet his requirements, I would take a look at TRLG. Trades at 15 times earnings, has 80% return on equity, and is likely to grow revenue at 25-35% per year. I have written about it at my blog www.strategicinvestor.blogspot.com

  7. Dave M May 2, 2007 8:45 am

    Hey Dividend Guy!

    Where do you stand with the Rule #1 strategy? Did you completely give up on it, or are you still trying to find stocks that meet the criteria?

    I’ve been driving myself absolutely NUTS trying to find a solid investment strategy that meets my needs. I’d consider myself an aggressive investor, yet I don’t like to take stupid risks. For the most part, I only invest in mutual funds right now, but I want to be more active which is why I started reading Rule #1.

    The toughest part, obviously, is finding good stocks to invest in and figuring out when to invest. Rule #1 seems to cover all that.

    What are your thoughts? Please email me personally and let me know if you respond to this post. Thanks!

    Dave

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