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PMFJI, but after taking a quick look at your list, I kind of wonder about the value. One thing I noticed on nearly all of them is the very high debt to equity ratio. While I have a personal liking for buying below book, I tend to avoid companies where book value is leveraged to the teeth. IMO, the whole idea of buying below book is to purchase equity at a discount. If that equity is highly leveraged, book value belongs to creditors, not shareholders. To a certain extent I'll go along with the idea of leveraging assets to fuel growth, but GAAP allows so much room for abuse in capitalizing expenses, that highly leveraged assets is often a prime indication the company is unable to generate enough free flow cash from operations to run the business. As I see it, the main trap for investors screening for value is, "If it looks too good to be true, it's usually too good to be true."
I'd be interested in seeing some discussion from those who use some form of fundamental analysis in screening for value, on debt to equity ratios. I generally screen out anything above .5 to 1, and tend to favor those at .2 to 1 or better. If nothing else, it does eliminate the Enrons. Comments? |
