Let’s say you were around on VJ day, September 2, 1945, which was the day that Japan formally surrendered at the end of World War II. For the month of September 1945, the Dow Jones Industrial Average was at $180. Sixty years later in September 2005, the DJIA was $4,789. That is an increase of over 2600% over 60 years.

The problem is that the increase in the DJIA was not a straight line; it went up and down the entire time. If you could not wait for 60 years but only had 40 years, the price in September 1985 was $1,329, which is only a bit better than 700% for the four decades. If you only could wait 20 years, the price in September 1965 was $931, which was a bit better than a 500% increase.

How does this compare to interest earned in a bank? If you put $180 into a bank account and it earns 8.22% compounded daily for 20 years, then you will have about $931 (the same value as the DJIA that year). For 40 years, the $180 invested at 5% would result in your $1,329. The 60 year mark would turn your $180 into $4792 at 5.47%. This shows that the timing of your buying and selling can have a dramatic impact on the return of that investment.

“Buy and hold” may be good, but it does not necessarily mean that the longer you hold your investment, the wealthier you will become! This is due to the erratic nature of the stock market. You need a system that can maximize the return during the peaks and minimize the risk on the valleys. Five to eight percent returns seem quite small, especially for something as high-risk as the stock market.

Five to eight percent returns are probably adequate for a bank, but this is not a safe, FDIC-insured bank. This is a highly-volatile holding that can decline in value quite rapidly. Conservative banks can pay a lower interest rate because the saver can be assured that the rate of return is safe. In the stock market, your only stability comes from your understanding of what is happening to your investment.

You need a system that allows you to evaluate companies, buy into those companies that are good investments, and then transfer that money to other companies when the investment is better elsewhere. That system is described in my book, The Confident Investor. You can purchase my book wherever books are sold such as AmazonBarnes and Noble, and Books A Million. It is available in ebook formats for NookKindle, and iPad.

Company name Meredith Corporation
Stock ticker MDP
Live stock price [stckqut]MDP[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Poor
EPS growth Fair
P/E growth Good
EBIT growth Good

ANALYSIS

Confident Investor Rating Good
Target stock price (TWCA growth scenario) $43.45
Target stock price (averages with growth) $50.16
Target stock price (averages with no growth) $37.74
Target stock price (manual assumptions) $40.71

The following company description is from Google Finance: http://www.google.com/finance?q=mdp

Meredith Corporation (Meredith) is a media and marketing company. The Company is engaged in magazine publishing and related brand licensing, television broadcasting, digital and customer relationship marketing, digital and mobile media, and video creation operations. The Company operates two business segments: national media and local media. The national media segment includes magazine publishing, brand licensing, digital and customer relationship marketing, digital and mobile media, database-related activities, and other related operations. The local media segment consists primarily of the operations of network-affiliated television stations, related interactive media operations and video production related operations. In October 2011, Meredith completed its acquisition of Rachael Ray. In January 2012, the Company acquired FamilyFun from Disney Publishing Worldwide. In March 2012, the Company acquired Allrecipes.com, digital food brand.

 

Confident Investor comments: At this time, I think that a Confident Investor can cautiously invest in this stock as long as the price is correct. Most of the fundamentals of this company are good, in fact the company ranks as a Good company, but there are some concerns with the price of the stock. Namely the sales of the company are not growing at the rate that make me comfortable. I will not be adding this stock to my Watch List at this time.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

Company name The McGraw-Hill Companies, Inc.
Stock ticker MHP
Live stock price [stckqut]MHP[/stckqut]
P/E compared to competitors Fair

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Poor
EPS growth Fair
P/E growth Fair
EBIT growth Poor

ANALYSIS

Confident Investor Rating Poor
Target stock price (TWCA growth scenario) $32.04
Target stock price (averages with growth) $44.91
Target stock price (averages with no growth) $41.87
Target stock price (manual assumptions) $35.84

The following company description is from Google Finance: http://www.google.com/finance?q=mhp

The McGraw-Hill Companies, Inc. is a global information services provider serving the financial, education, commercial and commodities markets. The Company serves its customers through a range of products, services and distribution channels, including digital data and information, integrated digital platforms, online via Internet Websites, as well as with printed books, magazines and newsletters, and conferences and trade shows. Its segments include S&P Ratings, S&P Capital IQ/S&P Indices, Commodities & Commercial (C&C) and McGraw-Hill Education (MHE). In July 2011, the Company acquired Steel Business Briefing Group. In February 2012, the Company’s S&P Capital IQ acquired R2 Financial Technologies. On July 2, 2012, S&P Capital IQ, a business line of the Company acquired London-based Credit Market Analysis Limited (CMA) from CME Group Inc. In August 2012, MHE acquired Key Curriculum. In November 2012, Platts, a division of the Company, completed its acquisition of Kingsman SA.

 

Confident Investor comments: At this price and at this time, I do not think that a Confident Investor can confidently invest in this stock.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.