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TWEEDY, BROWNE COMPANY L.P.
What Has Worked in Investing
(continued from preceding
page)
Table 12:
The Extra Investment Returns from Value Stocks as Compared to Growth Stocks in France, Germany, Switzerland, the United Kingdom, Japan and the United States, January 1981 through June 1992.
|
France Germany Switzerland United Kingdom Japan United States Global (i.e., all of the above countries) Europe |
from Value Stocks vs. Growth Stocks over 11 1/2-Year Period January 1981 through June 1992 |
EARNINGS BOUGHT CHEAP
Low Price in Relation to Earnings
Sanjoy Basu, Professor of Finance at McMaster University, examined price/earnings ratios and investment results in "Investment Performance of Common Stocks in Relation to Their Price/Earnings Ratios: A Test of the Efficient Market Hypothesis", Journal of Finance, June 1977. His study covered New York Stock Exchange listed companies, about 500 stocks annually, over a 14-year period, from 1957 through 1971. The price/earnings ratios for all the stocks were calculated at year end, ranked from highest to lowest price/earnings ratio, and sorted into quintiles. (A quintile is 20% of the stocks listed on the New York Stock Exchange.) The study assumed that equal investments were made in each stock and that the stocks were sold after one year. The results are shown in TabIe 13. Portfolio 1, the highest price/earnings ratio group includes all companies with losses. Portfolio 2 is the same group of stocks as Portfolio 1 except the companies with losses have been excluded.
Page 14 of 42
14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27
28 | 29 | 30 | 31 | 32 | 33 | 34 | 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42
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