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

To: Kapusta Kid who wrote (11789)	1/10/2001 9:33:22 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78476

Pete Kocmalski, I generally use PSR to compare a company with itself; sometimes to compare a company with its industry peers. Also, for tech stocks, I try to watch that I'm not paying more than 3 or 4 (which if I recall correctly, is unsustainable per Ken Fisher in his PSR book). Although sometimes, I do step up and pay more than 3. One problem with Ken Fisher and PSR is that Mr. Fisher doesn't seem to use PSR at all in his work anymore. He's in favor of high p/e's (per a '99 Bloomberg article) for at least some stocks (holding on to them even if the pe is high), and in his Forbes writings, recommends choosing reasonable (my word) pe stocks from among the largest large caps, especially foreign at this time. Or so that's what seems to me his methodology now. It's as if he's disavowed anything to do with PSR. The Ken Fisher PSR thread here on SI that was started in '96 died within a few years because none of us could use psr effectively in selecting stocks. Well... okay, that's just my opinion. (I should speak for myself only.) It just didn't seem to work, or work as well as other methods that thread posters might have been evaluating. (Or if psr worked, none of us could convince any other of us that it did -g-) Problems for me with O'Shaughnessy's methods include: several alternative methodologies, difficulty in relating risk to reward with some models (high rel strength) even if there was a 40 year history, requirement for yearly rebalancing. In an article in Bottom Line newsletter, 7/1/99, he mentioned two factors "to consider when hunting for value stocks" ratio of price to sales (no more than 2.5) high dividend yield with a recommendation at that time of 75% value stocks & 25% growth, and within value - a 50/50 large cap/small cap split. Reading from a Barron's interview (I don't have the date) he said, "If you want to be a bottom fisher...go for fundamental values like low price-to-sales, low price-to-book, low price-to-earnings. Don't try to be a bottom fisher on price (i.e. buying the year's biggest losers)." Later though, just what you've posted Pete: "What i found was you are best off when you use these macro strategies like low price-to-sales ratio, high relative strength, regardless of market capitalization." (aside: During the time frame of these articles, there was much media discussion whether large cap stocks would continue to totally dominate small caps and if/whether small caps were doomed to mediocrity.) His number 2 method was the high dividend model (ala his Cornerstone fund), which appealed to me much more. I'm not current on his models or funds. (I believe he's given up managing public funds to try a venture in a new thing of individual self-developed/self-managed mutual funds); I defer to anyone with current or better information on the O'Shaughnessy models. Paul Senior