A Gem From Security Analysis

Can the analyst exploit successfully the repeated exaggerations of the general market?  Experience suggest that a procedure somewhat like the following should turn out to be reasonably satisfactory:

1. Select a diversified list of leading common stocks, e.g. those in the DJIA
2. Determine an indicated "normal" value for this group by applying a suitable multiplier to average earnings.  The multiplier might be equivalent to capitalizing the earnings at, say, twice the current interest rate on highest grade industrial bonds.  The period for averaging earnings would ordinarily be seven to ten years, but exceptional conditions such as occurred in 1931-1933 might suggest a different method, e.g., basing the average on the period beginning in 1934, when operating in 1939 or later.
3. Make composite purchased of the list when the shares can be bought at a substantial discount from normal value, say, at 2/3 such value.  Or purchases may be made on a scale downwards, beginning say, at 80% of normal value.
4. Sell out such purchases when a price is reached substantially above normal value, say 1/3 higher, or from 20% to 50% higher on a scale basis.