February 22, 2013
In the last part (part 9) of Brendan Byrnes' interview with Wesley Gray, author of Quantitative Value, Gray shares his most surprising finding: that price trumps everything as a predictor of future stock performance. In his research, he found that weighting price and quality equally results in overpaying. Therefore, he recommends choosing the best of the cheap stocks for your portfolio. He supports this claim by stating that, historically, a high-quality, high P/E stock will outperform a low-quality, high P/E stock, but a junky stock with a lower P/E will do even better. Benjamin Graham was right -- and Warren Buffett, with his success investing in marquee names such as Coca-Cola, is just an anomaly. Cigar butts are the way to go.
The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the brand-new free report, "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.