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TWEEDY, BROWNE COMPANY L.P.
What Has Worked in Investing
 (continued from preceding page)


If anything the superior performance of the value strategy is skewed toward negative return months rather than positive return months. The evidence [in Table 9] thus shows that the value strategy does not expose investors to greater downside risk."

Companies Throughout the World: Low Price in Relation to Book Value
In Ben Graham Would be Proud, a Morgan Stanley & Co. Inc. research report dated April 8, 1991, Barton M. Biggs, a managing director of Morgan Stanley, described a study which examined the returns from investing in the stocks of non-U.S. and U.S. companies trading at low prices in relation to book value. In the study, all stocks in the Morgan Stanley Capital International database were ranked according to stock price in relation to book value and sorted into deciles each year from 1981 through 1990, a total of ten years. Approximately 80% of the companies in the Morgan Stanley Capital International database were non-U.S. companies. The number of companies in the analysis increased from 1,178 to 2,349 over the period. The average investment return for the companies included in each price/book value group was compared to the return for the Morgan Stanley Capital International global equity index. The investment returns were equally weighted and expressed in U.S. dollars. Table 10 shows the results by year.


Table 10:
Worldwide Low Price/Book Value Investment Returns

Price to
Book Value
Category

1 (Lowest price
  to book value)
2
3
4
5
6
7
8
9
10 (Highest price
  to book value)




1981

3.4%


2.9
3.4
5.6
(5.1)
1.8
2.3
1.1
(4.9)
(8.5)




1982

11.2%


12.2
15.9
10.1
10.8
7.9
6.4
6.1
3.7
(3.0)




1983

50.4%


37.4
30.1
32.0
28.6
22.1
22.5
20.8
20.7
21.6




1984

14.8%


7.3
6.1
0.6
(0.4)
12.0
2.3
3.3
3.5
(4.2)




1985

 68.9%


 58.1
 53.6
 50.3
 48.9
 55.0
 60.0
 54.2
 57.6
 53.5




1986

39.9%


26.7
37.5
44.0
40.0
53.1
58.7
54.0
59.3
66.0




1987

 15.9%


 15.4
 15.4
 15.0
 12.7
 19.9
 12.7
 18.3
 22.5
 24.0




1988

37.1%


28.6
21.0
16.5
19.7
21.7
21.6
15.8
19.4
19.8




1989

 27.2%


 27.6
 27.8
 33.5
 28.2
 28.3
 29.0
 25.7
 27.7
 21.7




1990

(16.1)%


(13.2)
(11.4)
(9.5)
(7.9)
(12.3)
(13.1)
(17.2)
(25.5)
(23.3)

Cumulative
Compounded
Annual
Return

23.0%


18.8
18.6
18.4
16.2
19.3
18.2
16.3
15.7
13.8

Return:
excess
Market
Index

5.1%


0.9
0.7
0.5
(1.8)
1.4
0.3
(1.6)
(2.2)
(4.1)

One million dollars invested in the lowest price to book value category starting in 1981 would have increased $7,953,000 at the end of 1990. One million dollars invested in the highest price to book value companies would have increased to $3,651,000 over the same period.

Page 12 of 42

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