Through the AOE Equity Index, the Club’s Adviser researches and recommends annually to the Club and all her subscribers, 24 quality stocks believed to be selling cheaply based on either their assets value and/or long-term future earning power. The recommended stocks are selected based on their potential for real total-return over the next one to three (1-3) years. They are mostly high-grade common stock of leading corporations that can be purchased at individual price levels that are not high in the light of experience and analysis.
As a rule, the Index does not recommend expensive stocks. Stocks recommended by The Index are undervalued when related to their asset value and/or indicated long-term future earning power. Because the Index does not buy expensive or high multiple stocks for which an earnings disappointment can mean a plunging drop in the share price, the Index does not experience the kind of deep drops seen in the general market or most other alternative strategies.
In making our recommendations, we are guided largely by the three requirements of underlying safety, simplicity of choice, and promise of satisfactory results. The use of these criteria has helped us to limit our recommendations to stocks that offer good potential for satisfactory return and at the same time carry little or no risk of permanent loss of capital.
The stocks in the index are not held for any specific or predetermined periods. Holding period for the stocks in the AOE Equity Index is dependent upon the anticipated short or long term income and capital appreciation potentials of each position.
OTHER THINGS TO KNOW ABOUT THE INDEX
The goal of the Index is to help you identify potentially undervalued stocks that are likely to outperform the market. It's up to you to decide if these stocks meet your investment objectives. In other words, the index is developed to help investors find a non-emotional way to identify undervalued stocks; and its past performance when compared to its benchmark, the S&P 500 Index has been very impressive.
Will the Index beat the market averages 100% of the time? Probably not. The goal is not to beat the market averages 100% of the time; but to do a lot better than the market averages over the next 1-3 years.
Don’t invest money you will need within a year in the recommended stocks as some of the recommendations could go down in the short term or take more than a year to show their true potential. In other words, when investing in any of the recommended stocks, you should expect to hold it for at least a year, or until one of the following occurs:
- The stock price goes up significantly, making the stock no longer undervalued
- There are negative changes in the fundamental of the company, making the stock no longer desirable.
“The main point is to have the right general principles and the character to stick to them.… The thing that I have been emphasizing in my own work for the last few years has been the group approach. To try to buy groups of stocks that meet some simple criterion for being undervalued—regardless of the industry and with very little attention to the individual company.… Imagine—there seems to be practically a foolproof way of getting good results out of common stock investment with a minimum of work. It seems too good to be true. But all I can tell you after 60 years of experience, it seems to stand up under any of the tests that I would make up.” -Benjamin Graham
"Provide in advance for the needs of thy growing age and the protection of thy family. For a lean purse to a man who is no longer able to earn or to a family without its head is a sore tragedy"- George S. Clason