John Graham was a wealthy pork packer based near the Union Stock Yards in Chicago. His son Pierrepont was headed to Harvard for his first year of college.

That bit of news kicked off a series of letters from ‘ole dad offering advice that started with education.

Of course, Graham is a fictional character in the book Letters of a Self-Made Merchant to His Son written by George Lorimer in 1901 but the advice still works.

The book is filled with early 1900s maxims and wisdom on education, business, life, and more. Continue Reading…

Some people happily pay a premium for quality. If you think a product — like iPhones, designer bags, or shoes — is higher quality, it might be worth paying more. Sometimes you actually get more than your money’s worth. Other times, the premium is the cost of being associated with the logo.

It’s no different with stocks.

Investors pay a premium for stocks labeled “quality” or “excellent.” Sometimes, it’s worth it.

In 1987, Michelle Clayman tested the performance of so-called “excellent” companies based on fundamentals relayed in the book In Search of Excellence.

The book labeled 36 publicly traded companies as “excellent” based on specific fundamental criteria: asset growth, equity growth, return on capital, return on equity, return on sales, and price to book. Clayman looked at the performance of 29 companies (of the 36 still in existence) to see how well “excellence” performed. Over a five year period (1981-1985), an equal-weighted portfolio of the 29 “excellent” stocks beat the S&P 500 by 1.1% per year. Continue Reading…