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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (21604)7/6/2005 5:34:33 PM
From: E_K_S  Read Replies (1) of 78774
 
Hi Paul - It was discussed upthread that small cap stocks generally provide the best overall return because they are undiscovered and overlooked by a lot of investors.

Can you define what your definition is for a "value" small cap company? Specifically, what is the market capitalization threshold and are there any other "small cap" attributes you look for (like sales, p/s, p/b, pe and others)?.

Our friend Cramer (although not a value investor) does look at company fundamentals. I thought his rational for PE was interesting. He will NEVER pay anymore than twice the expected growth rate. So if a company is growing at 10% and has a trailing PE of 10, he would pay as high as a forward PE of 20 if he thought there were other company specific events that would lead to accelerated growth.

After looking at many of my trades over the years, my multi baggers have been with emerging small cap companies. However, my most recent multi baggers since FY 2000 have been with high flyer large caps that flamed out as a result of (1) caught in the high tech boom or (2) a good company that experienced bad management decisions (merger, acquisition etc). Specifically GLW (Corning), S (Sears), JCP (JC Penny) and EP (El Paso Electric) were some of my current large cap winners.

EKS
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