Joe,
That is a great article - thanks for pointing it out. There were a couple of particularly interesting points made. I liked the one about price to book being the most reliable of all indicators of stock performance:
"The study, conducted with Kenneth French, then of Yale, confirmed Banz's small-stock effect but also showed convincingly that the lower the company's ratio of price to book value, the higher its subsequent stock performance tended to be. No other measures had nearly as much predictive power--not earnings growth, price/earnings, or volatility."
I think the last time I looked, approximately 10 of the 41 stocks in the group are trading at less than 1.0 p/b.
The quote I really like however, is:
"In fact, small stocks that also trade at low price-to-book ratios provided the best results of all in Fama and French's study, returning an annual 20.2% over 70 years, eight points more than big growth stocks."
I, for one, am ready for those 20 percent annual gains - when do we start.:)
Don W. |
