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Strategies & Market Trends : Contrarian Investing
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From: pcyhuang9/9/2006 8:25:57 AM
   of 4080
 
Graham's brand of contrary investing comprises of the following three screens:

I. The Enterprising Screen has the following criteria:

*The price-earnings ratio is among the lowest 10% of the database (Percent Rank less than or equal to 10)

*The current ratio for the last fiscal quarter (Q1) is greater than or equal to 1.5

*The long-term debt to working capital ratio for the last fiscal quarter (Q1) is greater than 0% and less than 110%

*Earnings per share for each of the last five fiscal years and for the last 12 months have been positive

*The company intends to pay a dividend over the next year (indicated dividend is greater than zero)

*The company has paid a dividend over the last 12 months

*Earnings per share for the last 12 months is greater than the earnings per share from five years ago (Y5)

*Earnings per share for the last fiscal year (Y1) is greater than the earnings per share from five years ago (Y5)

*The price-to-book ratio is less than or equal to 1.2

II.The Defensive (Utility) Sreen has the following criteria:

*Only companies in the utility sector are included

*Total assets for the last fiscal quarter (Q1) are greater than or equal to $200 million

*The long-term debt to equity ratio for the last fiscal quarter (Q1) is less than 200%

*Earnings per share for the last seven fiscal years and for the last 12 months have been positive

*The seven-year growth rate in earnings per share is greater than 3%

*The company intends to pay a dividend over the next year (indicated dividend is greater than zero)

*The company has paid a dividend over the last 12 months as well as each of the last seven fiscal years

*The price-earnings ratio, using an average of earnings per share for the last three years, is less than or equal to 17

*As interest rates rise, the price-earnings ratios fall because future earnings are worth less to investors today when discount rates rise. Therefore, we adjust the price-earnings ratio to reflect changes in the level of market rates

*The product of the current price-earnings ratio multiplied by the price-to-book ratio is less than or equal to 25.5 (price-earnings ratio maximum times 1.5 the maximum price-to-book ratio)

III. The Defensive (Non-Utility) Sreen:

*Those companies that are part of the utilities sector are excluded

*Sales over the last 12 months are greater than or equal to $400 million

*The current ratio for the last fiscal quarter (Q1) is greater than or equal to 2.0

*The long-term debt to working capital ratio for the last fiscal quarter (Q1) is greater than 0% and less than 100%

*Earnings per share for each of the last seven fiscal years and for the last 12 months are positive

*The seven-year growth rate in earnings per share is greater than 3%

*The company intends to pay a dividend over the next year (indicated dividend greater than zero)

*The company has paid a dividend for each of the last seven fiscal years and over the last 12 months

*The price-earnings ratio, using an average of earnings per share for the last three years, is less than or equal to 17

*As interest rates rise, the price-earnings ratios fall because future earnings are worth less to investors today when discount rates rise. Therefore, we adjust the price-earnings ratio to reflect changes in the level of market rates

*The current price-earnings ratio multiplied by the price-to-book ratio is less than or equal to 25.5 (price-earnings ratio maximum times 1.5 the maximum price-to-book ratio)

The above Graham's methods of contrarian investing are as specified by the American Association of Individual Investors.

pcyhuang
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