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

To: E_K_S who wrote (21612)	7/6/2005 7:37:34 PM
From: Paul Senior	Respond to of 78774

E_K_S. Nice moves in those stocks. In retrospect, looks like they were good bets, maybe even reasonable if not obvious. Always in retrospect though -g-. Sorry I didn't buy and hold even a few shares of any of them. I passed on Sears many times, GLW when it sold below cash value, and had JCP but lost patience and sold at a loss. I've no operating definition of "small cap". I've heard some use under $1B. I'd be more at under $200M. Seems to me that I just call a large cap a "large cap" when I feel like it, and anything under maybe 50-75M "dinky". Probably I'm not consistent. I'm one who likes to use past history - in many cases more so than future prospects. I rarely use future estimated earnings growth - it's too judgmental and iffy imo. That forward estimate (e.g. five-year forward growth rate) in conjunction with current p/e gives the PEG ratio - the number Cramer, et. al. like - and I do not. I'd rather use other ratios. I like the standard value stuff - p/bk, p/e, p/sales. I also like avg. roe, average profit margin. I use the same measures for all stocks, but vary how I weight them depending on the business. For stocks with no book value, I might look at p/sales. For stocks with high p/sales, I might want to emphasize profit margins. (Good stocks here would be ones that sell at high price to sales, yet the profits from those sales are terrifically large - e.g. large profit margins.) I'll often check past revenue growth (average over past few years) - I've found this number less helpful to me though in picking and holding stocks. I understand there's academic and practical evidence that relative strength is a helpful factor in selecting stocks (Cornerstone funds, one of the first to emphasize this, if I recall). My preference in buying a stock is to lag in if/as the stock drops. As a result, I'm just not attuned to this factor, which seems to be buying as the crowd buys. Perhaps I am wrong, and I should be using relative strength. Anybody here who uses this component, please chime in with your opinion.