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

To: william g. hart who wrote (3701)	3/31/1998 3:41:00 PM
From: Chuzzlewit	Respond to of 78659

Bill, the best source I know of Is Graham and Dodd's Security Analysis. But be forewarned, there are no easy roads to deciding what numbers or ratios are good or bad. As a financial analyst I look for trends, and I always try to find out if the ratios make sense in the context of the business. For example, ordinarily you might think that the higher the current ratio (current assets/current liabilities) the better. But too high a number implies inefficient use of resources. That's the same kind of thing with days in inventory (Inventory/(COGS*days in the period)). Too high a number may mean a lot of "dead" inventory and high inventory costs. Too low a number may mean that the company is losing sales because it is running out of good. Hope this helps, Paul

To: william g. hart who wrote (3701)	3/31/1998 9:11:00 PM
From: Paul Senior	Respond to of 78659

Bill, the worst source I know of Is Graham and Dodd's Security Analysis. Now there's a book that can discourage you from investing in stocks in the late 20th century -g-. Try Al Frank's Prudent Speculator for basic numbers. O'Shaugnessy (see that thread), What Works on Wall Street, Ken Fisher's Super Stocks for a good treatise on price/sales ratios. Of course, you've already read Graham's Intelligent Investor, I presume. You raise a good question about determining financial ratios and their relevance to value investing. But don't you live near a library or bookstore where you can peruse selections that might meet both your needs and your comfort level?