Stock Picking for Noobs
June 11, 2007 20076 12:06 pm | In Finanducation | Comments OffWho best to learn but from the gurus themselves? Here's a brief list of gurus and their strategies:
1. Benjamin Graham – Value Investing GuruStrategy: Buy shares at price well below company's intrinsic value!Indicators:
- P/E < 15 for average earnings over last 3 fiscal years (or current P/E whichever is higher)
- No financial/technology stocks
- Annual Revenue > $340 million
- Liquidity: Current Assets/Current Liabilites > 2
- Industrial companies: Long-term debt < Net current assets
- EPS increases > 30% over 10-year period, must not be negative within last 5 years.
- (Price-to-book ratio)*(P/E) < 22
2. Peter Lynch – P/E Growth GuruStrategy: Divide attractive stocks into different categories.Indicators:a. Fast Growers:
- Little debt, Debt to Equity Ratio < =1
- Annual EPS Growth Rate = 20 to 30
- Current P/E < = 1.75*Annual EPS Growth
b. Slow Growers:
- High dividend payouts
- Sales > $1 billion
- Low yield-adjusted PEG ratio
- Reasonable debt-to-equity ratio
c. Stalwarts:
- Moderate earnings growth
- Potential for 30-50% stock price gains over 2 year period if bought at attractive prices
- Positive earnings
- Debt-to-Equity ratio < 0.33
- Sales rates increasing inline with, or ahead of inventories
- Low yield-adjusted PEG ratio
3. Martin Zweig – Conservative Growth InvestorStrategy: To be fully invested in the market when the indications are positive and to sell stocks when indications become negative.Indicators:
- Quarterly earnings positive and growing faster than:
- –1 year ago
- –last 3 quarters
- –last 3 years
- Sales growing as fast or faster than earnings
- P/E > 5; BUT P/E < 3*Market P/E or 43, whichever is lower
- No high level of debt, below-average for industry
Source: NASDAQ,MartinZweig.org
4. Brothers David and Tom Gardner of Motley Fool – Small-Cap Growth InvestorStrategy: Search for stocks of small, fast-growing companies with solid fundamentals.Indicators:
- Health profit margins
- Little debt
- Ample cash flow
- Respectable R&D budgets
- Tight inventory congtrols
Source: NASDAQ
5. Kenneth Fisher – Price-to-Sales InvestorStrategy: The lower a company's stock price is relative to its sales, the more attractive its stock is.Indicators:
- Strong balance sheet with little debt
- Low Price-to-sales ratios
Source: NASDAQ
6. David Dreman – ContrarianStrategy: Search for deep-discount value stocks.Indicators:
- Good earnings growth
- Low P/E
- Low P/B Ratio
- Low Price-to-Cashflow Ratio
Source: NASDAQ, Investopedia
7. James P. O'Shaughnessy – Growth/Value InvestorStrategy: 2 investment strategies: "Cornerstone Growth" and "Cornerstone Value"Indicators:a. Cornerstone Growth
- Market value > $150 million
- Price-to-sales ratio < 1.5
- Persistent earnings growth, among market's best performers over prior 12 months
b. Cornerstone Value
- Market cap > $1 billion
- Revenue > 50% greater than mean of market's 12 month sales
- Cashflow per share > average publicly-traded company
- Yield Factor: Company which has highest dividend yield from 50 shortlisted using above criteria.
No comments:
Post a Comment