Hi IV,
So if you run a hybrid Buffett/ Graham screen right now with ROIC > 10%, D/E < 0.5, 5-year rev growth > 15%, 5-year tbook growth > 15%, PE < 10, PB < 2, I pull up some "has-been" E&Ps (including my favorite has-been BNKJF), a couple semi-semi equips, a couple commodity plays, a couple banks and insurers, a small airline. So you're basing laboring under the handicap of ttm numbers for industries at inflection. For that reason I tend to avoid income-dependent multiples. I also dislike book-dependent (except tbook-dependent) multiples for my combined screens. For CFS I like EV/ EBITDA. In principle EV/ FCF should be a great screen but in practice FCF can be so variable that it tends to miss good companies such as growth cyclicals. I like PE only with DE and PE 5 as qualifiers. I like ROE only with minimal leverage and a reasonable P/ tbook. ROIC is again income-dependent and harder to use during a mature bull market. Two I love are rev growth and tbook growth because they're less susceptible to the short-term misfortunes that produce opportunities for the value investor and instead focus on long-term organic growth and value creation. Or you could just swear off screening altogether; I'm trying real hard to reduce my reliance :)
Graham |
