billyjoe
06-27-2006, 08:06 PM
------It may be time to start looking for undervalued stocks. You'd have to believe there's lots of them available. How do you find undervalued stocks? Google led me to several sources and each had a little or in some cases a big difference in their definition. Here's something gleaned from at least 11 different sources. Sites are listed below.
------Undervalued stocks or value oriented investing. Stocks rich with no debt. Those breaking above long term downward trendlines.
------Market price is below intrinsic value.Valuation changes when there is an increase or decrease in price , earnings , debt , sales , or their market sector has fallen out of favor.
------Has been depressed due to short term market concerns or may have one depressed fundamental whose uncertainty is keeping the price low.
------Price is at a low historical level despite long term positive ROA,ROE,ROI , and sales growth is greater than it's same industry peers . Short ratio as well as number of outstanding shares also must be considered.
------Benjamin Graham in "The Intelligent Investor" looked for stocks trading at a minimum 33% discount to the Net Current Asset Value (NCAV) which he defines as current assets-liabilities/shares outstanding.
------Warren Buffet , a student of the Graham theory of investing uses a minimum 5 year track record of ROE as Net Income/Shareholder Equity.
Debt/ Equity ratio - Total Liability/Shareholder Equity. He also uses a 5 year history of Profit Margin = Net Income/Net Sales. IPO must be at least 10 years old. Must have an "economic moat" a competitive edge or monopoly on it's peers . He requires intrinsic value to be 25% above market capitalization.
-------Some value investors exclusively use a price/book ratio or Mkt.Price/ Value of Assets. If the P/B ratio is less than 1 , the assets may be overvalued. If they are value investors stay away. Overvalued stocks often show low ROE and high P/B ratio.
-------P/B ratio doesn't take into consideration intangibles such as : brand name value , goodwill , patent value . Therefore it won't work in evaluating service oriented businesses.
-------value stocks "little known stocks with lack of buzz or publicity'"
-------some use the dividend yield theory to determine undervaluation. The stocks will be within 10% of historically high dividend yield.
-------another source uses these guidelines
1. low P/E 2. low price relative to cash flow 3. low price/book value 4. low or no debt 5. uptrending earnings 6. high inside ownership
-------value stocks with little publicity probably will have little or no analysts covering them
-------many value stock investors assume their picks will rebound within a 24 month time period. Therefore they may be considered long term investors
-------Some value investors look for stocks with a one time glitch in earnings or sales or maybe an unusual event such as a major lawsuit or bad publicity that has beaten down an otherwise high quality stock.
Sources :
www.stockvaluepicks.com
secure.globeadvisor.com
www.americasvalueinvestor.com
sify.com
www.tdwaterhouse.com
www.investopedia.com
www.grahaminvestor.com
stockgarden.com
betterinvesting.org
technicalstockpicks.com
dogsofthedow.com
vectorvest.com
magicformulastockinvesting.com
I'll be back later with a list of 10 stocks that seem to be undervalued by at least 33%.
------------billyjoe
------Undervalued stocks or value oriented investing. Stocks rich with no debt. Those breaking above long term downward trendlines.
------Market price is below intrinsic value.Valuation changes when there is an increase or decrease in price , earnings , debt , sales , or their market sector has fallen out of favor.
------Has been depressed due to short term market concerns or may have one depressed fundamental whose uncertainty is keeping the price low.
------Price is at a low historical level despite long term positive ROA,ROE,ROI , and sales growth is greater than it's same industry peers . Short ratio as well as number of outstanding shares also must be considered.
------Benjamin Graham in "The Intelligent Investor" looked for stocks trading at a minimum 33% discount to the Net Current Asset Value (NCAV) which he defines as current assets-liabilities/shares outstanding.
------Warren Buffet , a student of the Graham theory of investing uses a minimum 5 year track record of ROE as Net Income/Shareholder Equity.
Debt/ Equity ratio - Total Liability/Shareholder Equity. He also uses a 5 year history of Profit Margin = Net Income/Net Sales. IPO must be at least 10 years old. Must have an "economic moat" a competitive edge or monopoly on it's peers . He requires intrinsic value to be 25% above market capitalization.
-------Some value investors exclusively use a price/book ratio or Mkt.Price/ Value of Assets. If the P/B ratio is less than 1 , the assets may be overvalued. If they are value investors stay away. Overvalued stocks often show low ROE and high P/B ratio.
-------P/B ratio doesn't take into consideration intangibles such as : brand name value , goodwill , patent value . Therefore it won't work in evaluating service oriented businesses.
-------value stocks "little known stocks with lack of buzz or publicity'"
-------some use the dividend yield theory to determine undervaluation. The stocks will be within 10% of historically high dividend yield.
-------another source uses these guidelines
1. low P/E 2. low price relative to cash flow 3. low price/book value 4. low or no debt 5. uptrending earnings 6. high inside ownership
-------value stocks with little publicity probably will have little or no analysts covering them
-------many value stock investors assume their picks will rebound within a 24 month time period. Therefore they may be considered long term investors
-------Some value investors look for stocks with a one time glitch in earnings or sales or maybe an unusual event such as a major lawsuit or bad publicity that has beaten down an otherwise high quality stock.
Sources :
www.stockvaluepicks.com
secure.globeadvisor.com
www.americasvalueinvestor.com
sify.com
www.tdwaterhouse.com
www.investopedia.com
www.grahaminvestor.com
stockgarden.com
betterinvesting.org
technicalstockpicks.com
dogsofthedow.com
vectorvest.com
magicformulastockinvesting.com
I'll be back later with a list of 10 stocks that seem to be undervalued by at least 33%.
------------billyjoe