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Strategies & Market Trends : Value Investing
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To: Carl Worth who wrote (19894)10/18/2004 10:03:07 PM
From: Paul Senior  Read Replies (1) of 78666
 
Carl Worth: Many factors and ways to consider in buying a value stock.

I like to have quantitative measures for which I can evaluate stocks within a sector. Many sectors, in my view, have key metrics which one can use to determine if a stock is in a buy range or not. For bank stocks for example, efficiency (a metric), book value, and return on assets are key measures. If I can find a bank stock for example, with an ROA of 1.5%selling at 1.5 x book value, that is a buy opportunity. Or a bank stock that is profitable and sells at book value. For manufacturing firms I often use ROE in a valuation formula. For software/consulting firms I like to use profit margin and relate that in a formulaic way to p/e. I generally look at all stocks in terms of p/e, p/sales, p/book.

I don't say having these metric rules-of-thumb are the best way. Certainly not the only way I evaluate potential value stocks. Probably the most frequent for me though.
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