 Good day, fellow investors. We continue with our summary. We are already at Chapter 15. Check the playlist for the first 15 chapters. We are close to the end and close to the most important chapter, which is Chapter 20. So please subscribe. Let's dig into Chapter 15, Stock Market Selection for the Enterprising Investor. Hi, my name is Sven Kerlin. I'm a full-time stock market researcher and I run the Sven Kerlin Stock Market Research Platform. And the question, Graham starts his chapter with is can you beat the market? And he dissects, he says how it's extremely difficult, how most fund managers fail to beat the market. That's a normal statistic. Fund managers, investors make the market, so attach the fees. Most of them will beat, will not beat the market, will underperform. And he says that that might be because of two reasons. First is the efficient market theory that everything that there is out there to know about the stock is already priced in and you can only adjust the models to what is going on and to new information. And of course that a lot of debate there you can check my video on if you need stock market, if you need complex math to do stock market analysis or just to use stock common sense, investing common sense. And the other option Graham gives is that there are market inefficiencies and those are the inefficiencies that an enterprise investor has to take advantage of. Those inefficiencies come from investing there where nobody else is looking at the moment. So undervalued companies under the radar that don't have that market charm that everybody is chasing after. His methods to Graham Newman methods that they used for 30 years when I think they beat the market, they had a great investment with Geico of course. Those methods are arbitrage, buying one security and selling the other that has offered to buy the first one. So when there is an acquisition one company buys the other company you buy, the company that will be both at the premium and sell the other one that would have to give you a risk free return. Liquidations not many of those in this market but the goal is to receive more cash than what you paid for during the liquidation process. Related hedges, of course we are always talking here about very diversified portfolios. All of those things can go wrong and some of those can go wrong and Graham mentioned the 20% expected yearly return in a diversified portfolio. A lot of these are very difficult to find today. Related hedges, convertible bonds or shares with the sale of common stocks. So he bought the convertible bonds that will get him the shares and he shorts those as he can do that and return the stocks later and get the yield whatever is in the convertible bonds. Then the most important thing on what Graham is famous for net current assets bargain issues. Big diversification is what he promotes here. He used to have 100 stocks I think when and he buys when the stock price is below net current assets alone. This gives no value to the plant account or other assets just net current assets. Net current assets are calculated by deducting current liabilities from current assets. It is implied that the book value is above the net current asset value. Find this balance sheet online. So let's see we have assets current assets 149 000 current liabilities 407 000 so the net value of the net assets is 102 000. If we look at shareholders equity the book value is it is above that always look at the tangible book equity so that's what Graham would look at and then if the stock price is trading the market cap is below the 200 100 000 that is the net value of the current assets and he would look for a discount of 40 on that then it is a buy for Graham. So 40 discount on net working capital is extremely difficult to find in this market but if you stick to that you give it a long term there will be another 99 when I think 2000 stocks were not trading below working capital they were trading below cash per share so that was a big opportunity in February March of 2009 so there might be new opportunities if you keep the strategy in mind it might come helpful when the opportunity comes to you don't chase that then there is always secondary companies companies that have no charm to the public he used then the SAP guide back in the 60s to find those stocks I think today we have simply to go through the list of all the stocks traded on the American stock exchanges and then go global to find really those gems those undervalued under the radar gems that will give you a good return immediately and there are some criterias that we'll discuss in a second and great opportunities for the capital appreciation from around the world when it gets under someone's radar let's see this would be Graham's criteria current assets at least one point time 1.5 times current liabilities that not more than 100% of net current assets earning stability last five years dividend record some dividend earnings growth over the last five years at least price less than 120% extremely important and this world in this environment net tangible assets if you want to simplify this if Graham should pick one or two criterias criteria that would be price to earnings ratio and the well diversified portfolio of stocks selling under net current asset value if you can find that in those in this market so in this market this is very difficult but from what Graham was doing and today always value I think over the very long term will beat anything else as it has done in 94% of the cases 10 year returns over the past 90 years and you can check my video here in the end screen thank you for watching this looking forward to the comments still few to go for closing on the intelligent investor then we'll go to margin of safety set Claremont which is also very interesting book see you in the next video