Avoid

It must have been a happy coincidence. Shortly after I was engaged in some insightful dinner discussion on retirement, my friend Warren gave a talk on fiscal planning to my colleagues.

I shall not repeat what he said. Nonetheless, I find his advice on what stock to avoid timeless.

Here it is (in case you did not come):

• initial public offer (IPO), or companies listed for less than three years
• allotment or right issues for two consecutive years
• companies that do not pay a dividend
• diversification (or, actually, diworseification)
• hottest stock in the hottest industry (for example, the Apple)
• "new economy" or company in transition
• price-to-earn (PE) ratio above 25
• recent merger
• hedge fund
• any derivative

For those who had read The Intelligent Investor, this list is very much similar to the advice of Benjamin Graham.