The whole of this study has to do ultimately with the 'reliability' of an investment; however, the primary indicator of this reliability that a particular stock is to be treated with the respect of a bond should be started with Benjamin Graham. Graham was Warren Buffett's professor at Columbia University, a profoundly important influence upon Mr. Buffett.
Graham believed that if a given company had positive earnings (no deficit) for the previous ten (10) years, it could be said that this business had 100% reliability. In other words, this business was not going out of business in the near future and would create a profit, all things being equal. I go one or two steps further in that I propose that an upward trend in earnings over these ten years with an identifiable durable competitive advantage and a 'mega cap' position in the market makes the business a 'consumer monopoly,' a term used by the man who taught me business investing, David Clark, co-author of "Buffettology" and "The New Buffettology."
Gene
