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Outperforming the Market

The Importance of Size, Dividend Yields, and Price/Earnings Ratios

Security analysis cannot presume to lay down general rules as to the “proper value” of any given common stock. . . . The prices of common stocks are not carefully thought out computations, but the resultants of a welter of human reactions.

—BENJAMIN GRAHAM AND DAVID DODD, 19401

STOCKS THAT OUTPERFORM THE MARKET

What criteria can investors use to choose stocks with superior returns that will outperform the market? Investors are inevitably drawn to firms able to generate high earnings and revenue growth. But empirical data show this pursuit of growth often leads to subpar returns. To illustrate how growth does not necessarily translate into superior ...

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