Ask Colin

You have recently emphasized towards more defensive stocks in view of the market conditions. You have mentioned P/E's and dividend yield as specific criteria to use. Do you use historical or prospective numbers?

As described in my video, I use historical numbers because they are readily available. Also they are real. The idea behind using them at all is that they are two of the main valuation methods for shares - the PE multiple method and the dividend discount model. They work on the assumption that industrial companies have maintainable earnings streams. That is why we do not use them for non-industrial companies - the conceptual valuation method has to be different.

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