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

To: Mario :-) who wrote (59890)	10/9/2017 1:29:45 AM
From: David	Respond to of 78702

OK, great about the screen. I was just curious. I'm now in a hunt for criteria to try to build some screen that would return potential value candidates that could be suitable for further research. Relying on criteria implies a belief in efficient market theory - why does the market apply a different standard with regards to profitability and cost of capital to companies like Amazon and Tesla? Recent interest rates have effected investor and management behavior leading to equity prices which seem high. Companies need earnings to survive, do you want to measure earnings rate of change, the reason for the change, how management allocates the earnings, or the effectiveness of managements allocation. Investopedia.com could offer you some ideas. I just try to learn new things and keep improving the strength of the portfolio while trying to achieve the objectives of my investment plan. At this time, my concerns are greater with regard to my investment plan than the holdings in the portfolio. "Annualized cash flow" - this is probably something you need to adjust manually, correct? Or is it simply year over year number from cash flow statements? If you have some simple formula that only uses numbers from financial statements without the need for manually adjusting some numbers, and if it is not a secret, send me criteria and I can try (over long time, my old brain is slow learner) to get customized screen working. I just take the company's reported operating cash flow for a quarter and annualize it forward for a quick calculation. If I wanted to look at a company closely though and verify the cash flow they reported I would build my own spreadsheet for the company. Inputs supplied by various companies are not always consistent however and I don't know if US companies have the same reporting style as Canadian companies. Either way it is just a measurement at a point in time. p.s. I hear you about cash flow to debt ratio. I had MHR in my portfolio a while ago.... ouch!Investing world can now float in a huge debt all it wants. I was watching a financial news channel the other day where a guest was talking about the recent drop in DHX Media and mentioning how companies leverage up to make an acquisition and the expected cash flow doesn't happen and the stock price crashes - he still liked the content they had and would keep an eye on the stock. This drop in cash flow is similar to what happens to oil companies when the oil price drops significantly. Debt management is still a concern and the reason my focus is on my investment plan, I need to adjust as necessary.

To: Mario :-) who wrote (59890)	10/9/2017 10:21:40 AM
From: Paul Senior	Read Replies (1) \| Respond to of 78702

Regarding: "I'm now in a hunt for criteria to try to build some screen that would return potential value candidates that could be suitable for further research", here's what AAII says they use for Graham stocks: Enterprising:The price-earnings ratio is among the lowest 10% of the database (Percent Rank less than or equal to 10) The current ratio for the last fiscal quarter (Q1) is greater than or equal to 1.5 The long-term debt-to-working capital ratio for the last fiscal quarter (Q1) is greater than 0% and less than 110% Earnings per share for each of the last five fiscal years and for the last 12 months have been positive The company intends to pay a dividend over the next year (indicated dividend is greater than zero) The company has paid a dividend over the last 12 months Earnings per share for the last 12 months is greater than the earnings per share from five years ago (Y5) Earnings per share for the last fiscal year (Y1) is greater than the earnings per share from five years ago (Y5) The price-to-book ratio is less than or equal to 1.2 Defensive (Utility):Only companies in the utility sector are included Total assets for the last fiscal quarter (Q1) are greater than or equal to $200 million The long-term debt-to-equity ratio for the last fiscal quarter (Q1) is less than 200% Earnings per share for the last seven fiscal years and for the last 12 months have been positive The seven-year growth rate in earnings per share is greater than 3% The company intends to pay a dividend over the next year (indicated dividend is greater than zero) The company has paid a dividend over the last 12 months as well as each of the last seven fiscal years The price-earnings ratio, using an average of earnings per share for the last three years, is less than or equal to 17 As interest rates rise (fall), the price-earnings ratios fall (increase) because future earnings are worth less (more) to investors today when discount rates rise (fall). Therefore, we adjust the maximum price-earnings ratio to reflect changes in the level of market rates, as represented by the 10-year AA corporate bond yield The product of the current price-earnings ratio multiplied by the price-to-book ratio is less than or equal to 25.5 (the product of the maximum price-earnings ratio, which is currently 17, and the maximum price-to-book ratio of 1.5) As interest rates rise (fall), the price-earnings ratios fall (increase) because future earnings are worth less (more) to investors today when discount rates rise (fall). Therefore, we adjust the maximum price-earnings ratio to reflect changes in the level of market rates, as represented by the 10-year AA corporate bond yield. This, in turn, impacts the maximum allowable price-earnings ratio multiplied by price-to-book ratio for the screenDefensive (Non-Utility):Those companies that are part of the utilities sector are excluded Sales over the last 12 months are greater than or equal to $400 million The current ratio for the last fiscal quarter (Q1) is greater than or equal to 2.0 The long-term debt-to-working capital ratio for the last fiscal quarter (Q1) is greater than 0% and less than 100% Earnings per share for each of the last seven fiscal years and for the last 12 months are positive The seven-year growth rate in earnings per share is greater than 3% The company intends to pay a dividend over the next year (indicated dividend greater than zero) The company has paid a dividend for each of the last seven fiscal years and over the last 12 months The price-earnings ratio, using an average of earnings per share for the last three years, is less than or equal to 17 As interest rates rise (fall), the price-earnings ratios fall (increase) because future earnings are worth less (more) to investors today when discount rates rise (fall). Therefore, we adjust the maximum price-earnings ratio to reflect changes in the level of market rates, as represented by the 10-year AA corporate bond yield The product of the current price-earnings ratio multiplied by the price-to-book ratio is less than or equal to 25.5 (the product of the maximum price-earnings ratio, which is currently 17, and the maximum price-to-book ratio of 1.5) As interest rates rise (fall), the price-earnings ratios fall (increase) because future earnings are worth less (more) to investors today when discount rates rise (fall). Therefore, we adjust the maximum price-earnings ratio to reflect changes in the level of market rates, as represented by the 10-year AA corporate bond yield. This, in turn, impacts the maximum allowable price-earnings ratio multiplied by price-to-book ratio for the screen. ========== Just buying the screened stocks though hasn't worked very well apparently: Enterprising: -20% ytd; 9.8% 5-year Defensive (non utility): -6.1% ytd; 6.3% 5-year Might be better off with EKS's Graham-number approach. Or incorporate momentum: O'Neil CAN SLIM revised 3rd edition looks to be the winner of all AAII approaches over the past few years -- ytd, 3-year, 5-year.