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

To: Sergio H who wrote (2485)	11/1/2012 7:51:38 AM
From: bruwin	1 Recommendation Respond to of 4724

”I think there are many systems and tools but it all breaks down to what works for you.” Yes, absolutely, Sergio. And that’s why I usually try and preface my 5c worth with the following, or similar ... ”But that’s just my opinion and viewpoint. Others, or many, may disagree.” I will always hope that you and others “make a bundle” using whatever has worked for you. And it’s also great that investing stuff gets shared on these boards, because it’s often the case that there will be something that folk will find interesting or useful. So keep ‘em coming ... One of the reasons I commented on that article was because it’s a kind of hobby of mine that when I read about a “system”, especially one that has some form of mathematical context, that I like to do some digging and interrogation to see "what makes the system tick”. There are many ‘systems’ and indicators out there. Some of them are like a “black box” where you put data, or whatever, in at one end. The inner workings of the “box” then gets to work and out comes an “answer” at the other end. IMO, an example in this regard is the DCF system. You enter the data, which includes your future interest rate prediction, and the inner workings of the box gets to work and provides an answer about the value of a company today based on the projections of how much it’s going to make in the future. Needles to say, a vital component of the “inner workings” is the input of predicted interest rates. Get that wrong and it’s garbage in and garbage out. Russ Fisher looked at a sample of about 800 stocks which, I believe, represents somewhere between about 8% and 10% of the total number of companies on the NYSE, AMEX and NASDAQ. From what he saw he concluded that there was a ‘mathematical function’ related to the Net Profit Margin% and the Sales Growth Rate%. That could very well have been the case in the sample that he looked at, and over the time period that he looked at. And it could also be the case that those functions hold true for other companies, going forward. Personally I just have a problem with the P/S parameter. But that’s just me. No doubt time and application will show us the efficacy of his system.