The investment strategy of PURE Rating is based on the fundamental and traditional analysis by Benjamin Graham, one of the most influential American economist and legendary investor. He is by many considered the original father of the so-called fundamental securities analysis, which forms the basis of today’s value investing. Benjamin Graham taught among others the U.S. major investor Warren Buffett.
Graham represented the theory that it makes only sense to buy a stock below its fundamental value. But how do you as an investor know, where exactly this fundamental value lies.
In order to determine the difference of a stock’s current market-price and it’s justified price as suggested by the enterprise’s corporate data, Graham applied the fundamental stock analysis. He took into account the company’s financial characteristics such as its price-to-earnings ratio (P/E Ratio), dividend yield, economic profit growth and stock price-to-book-ratio (P/B ratio) to compare the current market value with the financial capital of the company, its liquidation value, dept/equity-ratio and the company’s past profitability.
This discrepancy is also called the „safety margin“ and is the key investment criteria of one of the biggest US-businessmen, Warren Buffet. American investor and best-selling author Phil Town reduced this investment strategy to its bare essentials and has made it popular again.
PURE Rating applies exactly this fundamental analysis in order to evaluate stocks or, more importantly, their enterprises’ financial conditions. Our investment strategy of active stock picking enables us to collect world-wide corporate data and clearly point out to you which stocks are undervalued and carry the probability of above-average returns. This corresponds to the principle of the above-mentioned value investing, which has developed from Graham’s work.
The crucial point remains that an attractive stock price is a requirement for the acquisition of an enterprise.
Consequently, investors should ignore market fluctuations, as they can trust the concept of „margin of safety“ which says that after a well-conceived acquisition, a company’s stock will eventually develop in the investor’s favour.
Buffet himself summarizes the characteristics of a worthwhile investment target as follows:
„We only invest in companies (1) if we understand the business (2) if their long-term prospects are good (proven earnings power, good returns on invested capital, little or no debt, attractive business) (3) if the company is run by an entity of competent and honest managers (4) that are rated very attractive.
Through a complex analysis, PURE Rating collects all relevant corporate data of listed companies, evaluates them and finally publishes them in a ranking. This is carried out for a variety of world-wide indices such as Dow Jones, S&P 500, NASDAQ, DAX, MDAX, NIKKEI, etc. The elaborate analysis enables us to examine thousands of companies (on heart and kidney), pick out the top companies worldwide, and classify them in a list according to their quality.
We call this list the
It enables investors to find the “pearls” among a huge number of world-wide companies in which they might consider investing in order to exploit the best and most likely performance of the share value.
Manually, this is almost impossible. To carry out this analysis by hand for one business only takes about 30 minutes. For the S&P 500 with its 500 companies it would take approximately 250 hours, more than 10 days.
If you’d like to benefit from the analysis of thousands of companies world-wide, the professionally created PURE index offers you the ideal solution.
Our uniquely automated analysis completes this almost impossible task within an adequate amount of time.