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Investors today have instant access to minute by minute changes in the stock prices of their portfolio holdings in real time. Since stock prices tend to fluctuate wildly from one day to the next, I for one do not feel that this information overload is a good thing. What makes matters even worse is how wildly the value of a stock can change from one day to the next. It's not uncommon to see a stock rise or fall by 10% or more on any given trading day. Yet common sense would dictate that the intrinsic value of a large publicly traded company could not possibly change that much that quickly.

There was a time in the not-too-distant past when General Electric Co. (GE) was the darling of Wall Street and everybody's favorite stock to own. This was especially true during the Jack Welch Era, which spanned the years 1981 to 2000. In truth, I agree that Jack Welch should have been given a great deal of credit for the job he did in profitably running this large conglomerate. However, as I will soon demonstrate, I feel that Jack was given undue credit for General Electric?s stock price action during the last five years of his tenure.

Individual companies derive their value from the amount of earnings and cash flows they are capable of generating for their stakeholders. The market will inevitably capitalize a publicly traded company?s shares based on the velocity and volume of earnings generated. A PE ratio of plus or minus 15 generally applies to the average company growing earnings between zero and 12% a year. The essence behind this valuation is the idea that any company that generates a profitable income stream is worth more than one times earnings.

Both Visa, Inc. and MasterCard, Inc. enjoyed explosive moves in their stock values on Wednesday, June 29, 2011. Visa was up over 15% and MasterCard over 11% thanks to the Fed?s more liberal-than-expected stance on debit fee regulations. In our opinion, this perceived regulatory overhang had caused the share prices of these consistent and powerful earnings generators to sit below their intrinsic value. Therefore, we believed that the Durbin Amendment, although problematic for both Visa and MasterCard, would be less impactful to their long-term business than their low stock prices indicated.

These five industry dominant, blue chip, leading technology stalwarts represent prima facie evidence of how absurd and irrational the stock market can be at times. The facts are that the fundamentals underpinning each of these strong and healthy technology giants are significantly better than average. Therefore, logic would dictate that the shares of these companies? stocks should command a premium valuation relative to the average company or the S&P 500. It makes no rational or business sense that they don't.

We do not believe in forecasting stock markets or stock prices on individual stocks. Instead, we approach investing as the process of calculating intrinsic value based on fundamentals. The most important fundamental to be considered when evaluating the True Worth of a market is earnings. Therefore, it's important that the reader understands that this article is offered as a mathematical calculation of what the S&P 500 is actually worth based on earnings. The reason we believe this to be important is because we also believe that any deviations from fair value will ultimately self-correct.

You worked hard over your lifetime to build a nest egg in order to fund your retirement. Doesnt it make sense that now that youre retired your money should work as hard for you as you worked for it? When you were working, you were accustomed to receiving a raise in pay each year. Why should that end now, just because you are retired? It doesnt have to, because investors today have the good fortune and opportunity to invest in blue-chip 'Dividend Champions' (companies that have increased their dividend every year for at least 25 years) which are trading at historically low valuations

First, the title of this article does not refer to people who use stop losses in their investing strategies. Instead, the title of this article refers to the actual status of the common stock that the stop loss is placed upon. Therefore, a specific definition of a loser is required for clarity. In general terms, our definition of a loser is a common stock that should not currently be owned in the first place. There are two primary reasons why this would be true. Either the company's fundamentals are permanently deteriorating, or the company?s stock price is irrationally overvalued.

We hope that this primer on valuing super fast growing companies provided insights into how the market can capitalize such enormous growth. It may not always make sense, but we feel it's valuable to be able to graphically see how the market values fundamentals. It's not always logical, or even fair, but if you look hard enough there usually is some logic that can be discovered. The important thing is that statistics alone do not adequately tell the true whole story, in our opinion.

To us, the evidence is crystal clear, fundamentals provide a critical perspective that investors should be aware of. Possessing a clear and accurate picture of how well a business has performed on an operating basis is a vital component towards making sound and prudent investment decisions. Contrary to what some might argue, the fundamental operating results of the business tend to persist. The nature of a company's business and the industry it operates in can be reliably evaluated and understood.

These ten examples are based on our article: A primer on valuation: Testing the Wisdom of Ben Graham's Formula (part one) published on 2/08/2011. These represent just a few examples of many we could provide. Ben?s formula works because it is sound. The orange line on each logarithmic F.A.S.T. Graph below represents earnings multiplied by Ben Graham's formula. As you review each F.A.S.T. Graph note how the black price line tracks and correlates to Ben Graham's calculation of intrinsic value. In some cases, the correlation is almost perfect.

Ben Graham?s formula for valuing a company V* = EPS x (8.5 + 2g) established a solid foundation for future value investors to build upon. The small ?g? in the formula represents your reasonably expected 7 to 10 year growth rate. Consequently, Ben Graham?s formula was forward-looking. In this article we looked at modern historical performance in order to test the validity of this famous value formula. Remarkably, the formula proves itself to being very precise when applied in the real world to businesses that grow earnings between zero and 5% per annum.