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Buffett and Beyond: Uncovering the Secret Ratio for Superior Stock Selection, + Website, 2nd Edition by Joseph Belmonte

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Chapter 26

What Have You Learned? A Summary

I'm sure by now you are well aware there is a lot of information in this book. I have shared with you my many years of academic research. I'm also sharing with you over 33 years of actual stock market experience. You learned how Warren Buffett uses Clean Surplus Accounting to project a stock's price ten years into the future. You then learned how he discounts that future, target price back to the present, which in turn determines his all-important purchase price.

Using a combination of Buffett's method and my research work, you are now aware that you need to fill your portfolios with stocks that have high and consistent ROEs, with that ROE configured by Clean Surplus Accounting.

We saw in the published doctoral dissertation research that portfolios consisting of stocks with high ROEs outperformed portfolios that consisted of lower ROEs.

A random selection of 122 stocks that were asked about by our radio listeners showed the same findings that the doctoral dissertation research showed. Portfolios consisting of stocks with higher ROEs outperformed portfolios made up of stocks with lower ROEs.

Our model portfolio over the past 12 years has outperformed the S&P 500 index by over a two-to-one margin and also outperformed Buffett's Berkshire Hathaway portfolio by almost the same amount.

Let's review what you have learned but first please remember that in order to compare one company to another, we must first use accounting numbers that are ...

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