Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: rjm2 who wrote (11726)	1/6/2001 11:50:50 AM
From: TimbaBear	Read Replies (3) \| Respond to of 78497

This is an open letter to the thread and I ask for comment from all who have opinions. This is likely to be a very long post, so please be forewarned! I have "lurked" here for years, following the postings faithfully. At first, I knew very little about the concepts. I had read much and since, have read much more. I selected from the reading lists and recommendations posted here and elsewhere, and endeavored to understand every concept on every page....which for me, is sometimes no mean feat! I have occasionally posted here, I think the most recent was quite a while ago regarding the thinking of cruise passengers and how that related to CCL. Finally, I have learned the only true way I have learned anything in this life, I got hurt really badly....repeatedly. Suffering major financial setbacks in the market. I believe I have it in me to be a successful investor, and if it turns out that one day I come to the decision that I just don't have what it takes, then I'll move on to whatever else awaits. But until then, I must give it my best shot. All of the above is sort of a "qualifying" introduction. Now to the issues I'm facing: Through no great feat of mental acuity, I have decided that since the market has been in decline for quite a while, I might be able to find a few companies which are selling at great prices. Those who have a built in margin of safety. I will outline my evaluation process and ask you for insights and suggested improvements. First, I did a scan for all companies with a Price-to-Book(P/B) maximum of 1; with a Return on Equity(ROE) of at least 10; Trailing Price to Earnings ratio(P/E) of a max of 8; and finally, a forward P/E of a max of 10. This came back with something like 100 companies....I chose to manually write down the symbols(sort of a getting in touch with the earth kind of thing), and as I did, I screened the list and eliminated all banks, finance companies, mortgage companies and some others because they seemed to me to be "fad" companies. This left me with a listing of 46 companies to research. These companies I went through and weeded out all those who had poor current ratios(current assets divided by current liabilities of less than 2) and those whose net profit margin was less than 2%. I figured these companies would get cheaper if the economy is slowing down and competition forced margins even lower. This winnowing process left me with 18 companies. Then I went to the balance sheets. I added current assets and cash together and subtracted from that total all liabilities. I divided the answer by the number of shares outstanding. The answer I got I am calling "Net current value", but it probably has been labeled better somewhere and I would appreciate someone letting me know what it is. Then I took the Property, plant and equipment asset value and added to it all other remaining assets. I discounted that amount by 50% and divided the answer by the number of shares and got what I call "Net hard value"....again, there's probably a better name. Some additional thinning occurred during this process which drove the list down to 16 candidates. I will continue this on the next post, as this one is getting a bit lengthy.