Does the Earnings Power Chart work or is it just an interesting idea? Good question. After all, some effort is needed to build a defensive and enterprising income statement. Thus, you may find these case studies of interest. All companies here were selected using the methods described in my book It's Earnings That Count. Case study #1: Business Week cited It's Earnings That Count in its April 2, 2004 issue, and included six companies to buy and two companies to sell. One year later, my buy recommendations gained an average of +25%, vs. a +3% gain for the S&P 500. My sell recommendations declined an average of –39%. Business Week, Apr. 2, 2004-Apr. 1, 2005 Gain/(Loss) Buy recommendations (6) +25% S&P 500 +3% Sell recommendations (2) -39% Source: Business Week, BigCharts.com. Assumes investor bought or sold one share of each security. Dividends excluded. You can read the Business Week column, click here. Case study #2: Barron's published my Op-Ed column "The Power of Earnings Power" in its September 12, 2005 issue, and included five companies to buy and two companies to sell. One year later, my buy recommendations fell an average of -2%, vs. a +6% gain for the S&P 500. My sell recommendations also declined an average of –2%. Barron’s, Sep. 12, 2005-Sep. 11, 2006 Gain/(Loss) Buy recommendations (5) -2% S&P 500 +6% Sell recommendations (4) -2% Source: Barron’s, BigCharts.com. Assume investors bought or sold one share of each security. Dividends excluded. You can read the Barron’s column, click here. (subscription required).  Case study #3: My Earnings Power fund is up +41% during Nov. 1, 2005-May 31, 2007, vs. 28% for the S&P 500 Spiders Trust (SPY). All companies selected for my Earnings Power fund meet three (3) criteria: 1) authentic earnings power as judged by the Earnings Power Chart, 2) durable competitive advantage, and 3) market value less than intrinsic value. My Earnings Power fund typically owns about 20 companies, equally weighted. Cash averages 17% of total assets. Case Study #4: If you read Chapter 13 of my book It’s Earnings That Count, recall that Wm. Wrigley (WWY) enjoyed authentic earnings power and a durable competitive advantage, but was too expensive in relation to its expected future earnings growth. "If you want to obtain a 15% total return every year for the next decade, you would not want to buy Wrigley at its current stock price." I wrote these words on April 30, 2003, when Wrigley traded for a split-adjusted $45. Four years later shares reached $59, which means the stock generated a 7.0% compound annual growth rate. Add in a 1.5% dividend yield and Wrigley’s total return during this period is 8.5%, well below the 15% annual return many investors seek when they invest in individual companies. The S&P 500’s compound annual growth rate for this same period is 12.7%, dividends included. The lesson with Wrigley circa 2003-2007 is that you can waste time (or even lose money) owning the world's best companies if you overpay. Case Study #5: For a December 10, 2004 column for Motley Fool, Tim Beyers picked 9 stocks based on my earnings power criteria. A year later these picks went up an average of +18%, vs. a +6% gain for the S&P 500. For a December 23, 2005 column for Motley Fool, Tim Beyers chose 7 stocks based on my earnings power criteria. A year later these picks went up an average of +25%, vs. a +11% gain for the S&P 500. You can read the column here: http://www.fool.com/investing/small-cap/2006/12/22/scrooge-stocks-up-again.aspx