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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: seminole who wrote (39)	3/5/1998 11:29:00 PM
From: Berney	Read Replies (1) \| Respond to of 1722

Richard et al: I hope over time that folks will utilize this thread to share how they determine value. I essentially utilize four steps: 1) a process to limit the universe, 2) a FA scoring system, 3) a review of S&P ratings, and 4) a Graham formula. This communication focuses on the FA scoring system. I've posted it before, but, since I refer to the FA scores frequently, I wanted to get it on record on this thread. I use a scoring system that I've developed over time, and, which will undoubtedly evolve over time. The essence of the system is that PE by itself is meaningless. Like, compared to what? Here it is: 1) Score "1" if the PE ratio is less than the historical one year revenue growth rate; 2) Score "1" if the PE ratio is less than the historical three year revenue growth rate; 3) Score "1" if the PE ratio is less than the historical one year EPS growth rate; 4) Score "1" if the PE ratio is less than the historical three year EPS growth rate; 5) Score "1" if the PE ratio is less than the prior year Return on Equity (ROE); 6) Score "1" if the PE ratio is less than the average of the prior 5 year's ROE (but I will use 4 if 1 is not meaningful); 7) Score "1" if the prior year ROE is greater than the two-year ago ROE (I want to see ROE increasing); 8) Score "1" if at least 8 of the top ten mutual funds were adding to their positions in the prior month; 9) Subtract (a little different) "1" if the the PE ratio is at an all-time high as compared to the prior 5 years; 10) Score "1" if the the stock has beat the Index in at least four of the prior five years and the current year with no negative performance (the best I can do at stating it); 11) Score "1" if the PE ratio is less than the future five (projected) year annual EPS growth rate; 12) Score "1" if the current ratio is greater than 1.3 (the average of the S&P the last time I checked); 13) Subtract "2" if the company had negative free cash flow last year (companies and individuals -- myself excluded -- should live within their means); 14) Score "1" if the revenue of the company doubled from 1992 to the current trailing twelve months; 15) Score "1" if the company has had sequential, annual increases in EPS for the previous five years and the trailing twelve months. Thus, a perfect score is 13. Believe it or not I do all this manually right now. Enjoy, Berney