Warren Buffett's company, Berkshire Hathaway, has seen its measure of queasiness inducing peaks and troughs. Meanwhile, though, through over 40 years of heading that company, Buffett has managed to increase its book value (its worth per share less the liabilities per share) at an average annual rate of 20%. Despite the markets' volatility, market value has tended over time to exceed even that stellar performance. So, if an investor had simply bought BRK based on its book value, more shares when the price to book was low and fewer when it was high, the mean return would have better than doubled the cost basis (the amount spent, including commissions, to acquire the shares) every four years.

I hardly expect in my lifetime that BRK or any other company will repeat that kind of performance. Yet, a simple dollar-cost-average strategy of buying more shares of equities when their book values were high in relation to price would tend to be rewarding. Since cash yielding and higher cash flow companies tend to also do better than the index averages, a person could do a lot worse than to limit one's low P/Bk purchases to the shares of companies that have positive cash flow per share and that also return a portion of earnings to shareholders in dividends.

Ideally, one can invest in high book value, cash paying companies once a year, quarter, or month, depending on personal preferences, 401k plans, etc., ignore all the news of market volatility in the meantime, and smile all the way to the retirement "bank."

Personally, it is appealing as well to set an annual target for increasing my total book value holdings. This can provide a sense of genuine accomplishment regardless of what the crazy markets may be up to. Thus, if for instance I have set a goal of increasing total portfolio book value by at least 12.5% a year and of having average stock dividend yields of 2.5%, I can see a total increase in my value plus cash of 15% a year, whether or not in a bear market.

Fortunately, markets over the long haul tend to go where the most value is, so if my total book value has risen to $100,000 but the market value of my stocks is down around $80,000, then in the short- to medium-term (or at most the long-term), they will very likely increase their traded prices 25% or more, bringing them back into greater parity with their real values.

I like to also select among the several candidates those with the highest ratio of estimated forward dividend percent to estimated forward price to earnings (P/E).

So long as one can do so while still achieving both total book value and average yield goals, high book value plus cash assets can be rebalanced annually (or, in taxable accounts and with profitable trades, after a year and a day, for long-term tax treatment), in other words each year selling off assets that no longer meet the criteria and replacing them with ones that do.

Happy investing.