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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Michael Burry who wrote (8804)	10/29/1999 10:26:00 AM
From: Q.	Read Replies (2) \| Respond to of 78476

Mike, you must have the patience of Job to open 99 filings on Edgar. Considering that I am more impatient, and that I would only want to buy one or two stocks from such a list anyway, I think I would apply additional criteria to reduce the list to a dozen or so, and then open the filings. I tried the following ideas, which reduced the list to 7 stocks before I opened any filings: Starting with your three criteria, market cap < 0.667 * netnet, debt/equity < 0.5, and market cap > $2.5 M, I have a list of 84 stocks. Over a dozen of those are OTC:BB or pink sheets. I eliminate all of them, since I would never buy a stock traded on these exchanges, unless it were an ADR of a big foreign company (and such a stock would likely not be a net-net anyway). Adding this criterion reduces my list from 84 to 70. Since a lot of these tiny stocks are illiquid, I then eliminate those with a monthly dollar volume under a certain threshold of, let's say, $250k. That reduces the list to 45 stocks. As another tradeability criterion, I set a lower bound on the stock price of $2. That reduces the list to 19 stocks. Stocks on nasdaq must meet listing requirements, and tiny stocks are in danger of falling below those requirements and getting delisted. I would like to eliminate those with net tangible assets close to the delisting threshold, but I can't using StockQuest, so as a proxy for net tangible assets I'll use shareholders equity, which I compute from the price/book ratio. I'll eliminate those stocks with shareholders equity less than $5 M. This reduces the list to 11 stocks. Tiny market cap stocks are always in danger of going out of business, if they have liquidity problems, so I eliminated those with cashflow less than +0.2% of working capital. (I computed the cashflow from the price/cashflow ratio.) This reduced the list to 8 stocks. The survivors at this point are: data frdm holx istn pdkl wstna spa spor I'll immediately ignore wstna, because the "a" at the end suggests that there are more than one class of common stock, so maybe the market cap is likely higher than MarketGuide shows. That gives us 7 stocks. Now we have a list that is short enough for me to open some filings. I can do this in 5 minutes, if I take the following expediency: If I see restricted cash, preferred stock, multiple classes of common, or a large amount of goodwill, I drop the stock from the list. That's all I do in this first pass through the filings. It is easier than extracting the numbers and putting them into a calculation. Maybe I eliminate one stock that I would otherwise keep, but it saves me a lot of time. Doing this with the filings, I eliminate FRDM (multiple classes of common), and PDKL (preferred stock). This leaves me with 5 stocks, which is something that I could imagine actually researching: data holx istn wstna spa spor Here's a link to Yahoo with charts etc for these 5 stocks: quote.yahoo.com Taking a look at the charts, I wouldn't be surprised to see some tax-loss selling between now and December, so I would probably wait until year-end to buy any of these. Any thoughts on this stream-lined method?