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

To: Seeker of Truth who wrote (15184)	8/14/2002 2:01:05 PM
From: Jurgis Bekepuris	Respond to of 78567

Malcolm, I agree with you, but high ROE is Buffett investing, it is not value investing. Classic value investing ala Graham does not look at return at all. The only thing it looks at is valuation below 75% of current assets minus all liabilities. Or something like that. :-) Jurgis - never liked Graham, so bought TAVFX to do it for me... :-)))

To: Seeker of Truth who wrote (15184)	8/14/2002 3:32:32 PM
From: Paul Senior	Read Replies (2) \| Respond to of 78567

Malcolm Bersohn: Return on equity is not mentioned in Graham's "Intelligent Investor". Return on equity is not discussed in Dreman's "Contrarian Investment Strategies". There is a two-page discussion of ROE in Al Frank's "New Prudent Speculator". It ends with, "After we check out ROE, compare it with historical trend and rule-of-thumb levels, and check...what we have to pay for the equity and our return on equity, we have done all we need to do with this selection criterion." (p.48) I checked my notes/articles on James O'Shaughnessy. ("What Works on Wall Street") I find no discussion of ROE. It's neither used nor discussed in any of his strategies. ROE is one of the first things I look at. I use it like Al Frank does. Maybe there's an absolute requirement for an ROE threshold for you-- experts don't require it of themselves though from what I see. And as far as there "being something wrong with the situation", I find that normal going into a value stock. If there weren't something wrong, then the stock wouldn't be at a value price. -------------------------------------------- Can you offer some stocks that you believe to be value stocks that meet your criteria? Perhaps I'm looking at one now, HI (Household International)? Nice ROE, low price. Cheap. And ...(venting here)... dag-nabbit, I was too darn slow and placed my orders for more HI this morning too darn low. And didn't move them up enough or promptly. There has been quite a drop and comeback in the stock today. finance.yahoo.com

To: Seeker of Truth who wrote (15184)	8/14/2002 9:55:06 PM
From: Paul Senior	Read Replies (2) \| Respond to of 78567

Here's an example of what I'd call a value stock that has lousy ROE numbers: IAL. finance.yahoo.com Not much revenue growth: quicken.com ROE stinks: quicken.com Tangible book value (approx. $27 per S&P) has been increasing, but at a very slow rate. There's a $1.20/sh annual dividend. It's not been cut for at least the last ten years (as far back as S&P reports.). But it doesn't look like it's been covered by earnings for the past couple of years. There's no long-term debt! Selling for about $18/sh and with a bv of $27, could this then be a stock that might draw the interest of Mr. Sanjay Bakshi as one of his "debt capacity bargains"? This plodder company's lowest annual high value since '92 has been $23.56 (and that was in '00). In other words there's been no year since 1992 that the stock didn't trade at least as high as $23.55. (Of course that doesn't mean the future will repeat in '02, or '03, or ever.) I notice a couple of value funds are owners: FPA Capital, and Al Frank Fund. ----- I've put the stock on my watch list. I want to see if I can buy it a bit closer to its lows.