Hi Segio -
For others who just want to review that list of stocks, here is a Yahoo link that provides the detailed view for each of the candidate stocks in the article.
finance.yahoo.com
The one other very important screen that I use is my modified Buffet rule: That is that the annual net income should be 4x or less than the company's total LT debt. I will let 5X go through but in these times, companies with a lot of LT debt is something I would rather not own. In fact, with such low interest rates (ie low cost of capital), many companies have been able to pay down their LT debt to more manageable levels.
Therefore, I want to invest in those companies where the stock is selling at a discount to the calculated Graham No. AND at least 4x their net annual income is greater than or equal to the company's LT debt.
From the list 5 companies meet this LT debt test: PRA, PRI, SYX, WRB & SRCE
You also want to be sure BV is tangible BV and does not include any significant Goodwill, so adjust for that. I do notice that a few insurance companies make the list so I am not sure if these types of companies need any other special adjustments especially because of the potential liability in the policies they write (perhaps those are re-insured).
Finally, I want companies that are selling near their lows rather than their highs.
I still need to work through their list and then add those that look interesting to my GN watch list. My long term strategy is on any significant market correction, my filtered GN watch list will become my "Buy" list. In a fast market you will not have time to do your due diligence but will be pulling the trigger like a six shooter.
EKS |
