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

To: Lazarus who wrote (23943)	5/16/2006 12:52:29 PM
From: Madharry	Respond to of 78702

my portfolio keeps taking it on the chin . Despite my unhappiness with mgmt I added back more edv at these prices. I took an initial position in another penny stock that seems quite undervalued to me in the alternative energy/ organic area. very intriguing . I suggest interested parties do their own dilligence. CNVT.OB is the name of the company. First time in my life i accounted for most of the volume in a stock so i dont think you can put in big orders. another one of my pennnies- wsce is up a lot over the past two days. I have no idea why.

To: Lazarus who wrote (23943)	5/16/2006 3:26:20 PM
From: bruwin	Respond to of 78702

Hi Lazarus. The way I see it, whether or not a company will succeed with its business plan is, in my opinion, not a question one could answer with any great degree of certainty. However ... what one can do, with a far greater degree of certainty, is to interrogate certain areas of that company’s Income Statement and Balance Sheet and look for those signs/results/ratios etc.., which will tell us whether or not a company is doing well and providing value for its shareholders. To put it into a nutshell, so to speak, we interrogate seven specific areas within those Financial Statements (of Industrial companies) and calculate eight ratios which we then compare to set target percentages. If a company meets, or exceeds ALL these targets, simultaneously, then it must be doing well, financially .... and therefore, by inference, it’s very likely succeeding with its "business plan". In some way it could be seen as similar to your contention regarding "Deal" or "No Deal". One is constantly monitoring a company’s published Financial results and when those results reach a certain standard of Quality, the risk of losing money becomes far smaller. But that’s only the first of three steps in the process. The next one is related to your second question regarding the price to pay for a stock. In this regard we use the P/E ratio as our prime yardstick. In calculating the P/E we remove any Extraordinary items which may appear in the Income Statement in order to get a Bottom Line, and "E", which represents, as close as possible, the normal running of the business. It's a question of buying when the P/E shows the company's price to be relatively cheap. You can also, in fact, get a far more accurate idea of what a company’s P/E should be if that company pays a Dividend. My good friend, Dr.Karl Posel, combined finance with a bit of math and came up with a formula which helps in that regard. The third step in the process is to interrogate that short list of companies which one has arrived at after the above screening process. Those couple of companies which show the greatest potential for medium term price increase are the ones we would consider buying. The way we see it, it’s not a case of building a portfolio of dozens of stocks, but rather to narrow it down to a far smaller number of really Quality companies, which, needless to say, "don’t fall off trees" ! A good example, in this regard, has been HANS whose price has increased over 470% in the last 12 months. At this stage, I wouldn’t know what price to pay for OPCO because, to be brutally honest, I couldn’t care, seeing as its current Financials don’t meet the required criteria, so it doesn’t pass first base ! However, that’s not to say that I wouldn’t be interested at some time in the future, if OPCO’s numbers warranted it. You say you don’t know how to analyse a Balance Sheet (and, I presume, an Income Statement). Well, I’m sure the majority of Board members would probably encourage you to learn the basics. It’s certainly not "rocket science" and it will go a long way to assisting you in determining what to buy and, often more importantly, what NOT to buy ! bruwin.