Price to sales is another metric that has been used to Determine if a stock’s prices is cheap relative to revenue. It is assumed to be better used comparitively within a specific industry. The equation is simple P/S= market cap/revenue for specified period of time such as annually or trailing twelve months (TTM).
Looking at the risks of an investment is vital to understanding whether or not it is a sound investment. In a speech Alice Schroeder, author of Snowball, said that Warren Buffett starts his examination of a potential company by looking at the risks involved. If the risk is too high, he won’t go any further. We would be wise to follow this example.
One of the most important parts of beginning investing is starting a system to generate investing ideas or leads. If you don’t have a source of new investment leads or can’t afford premium services that funnel them to you, because you are small money investor, you can sit on the side lines waiting until a new investment opportunity drops in your lap. For me, at least, that almost never happens. pens.
But where to look? I like to start in the garbage heap, the detritus of stocks: the 52 week lows. For the non- value investor this idea may seem counter intuitive. Why would look at the losers to find a winner? There are several reasons, actually.
Back in November I talked about trying out Premium Investing Services before committing your limited capital. One of the services I tried out was Morningstar’s Opportunistic Investor. I have explored the service and initially I thought it was worth the money. They describe themselves as a service that, ”seeks to uncover investment opportunities in no-moat stocks, deep cyclicals, arbitrage opportunities, spin-offs, bankruptcy reorganizations, and other special situations. We typically look for upside potential that is many times the downside risk, and prefer stocks with identifiable catalysts to unlock value. We will constantly adjust our portfolio to maintain the best possible risk-reward ratio.”
As readers of my blog know I have never believed in Efficient Market Hypothesis. Here is a speech from the brilliant James Montier humiliating the idea, using cartoon characters in the process. Definitely check it out if you haven’t. I must thank Miguel at Simoleon Sense for leading me to this speech and James Montier in particular.
I found this idea in Tweedy Browne’s What Has Worked in Investing. And after a little more research I have included it in my Value Investing Series. In a “Test of Ben Graham’s Stock selection Criteria,” Henry Oppenheimer studied whether or not a set of Ben Graham’s investing criteria actually worked. Toward the end of Graham’s life he espoused a different, although related criteria to what he espoused in his master works Security Analysis and the Intelligent Investor.
The Quick Ratio, also known affectionately as the “Acid Test” is a metric used to measure short term solvency. In non jargon it is a formula used to figure out whether or not a company can meet its short term obligations.
The concept of Focus Investing is devilishly simple. Take the magnifying glass out and focus it on the very best investment ideas you have. Don’t pull the investment trigger unless you can say this is too good to pass up. It is the extreme opposite idea of diversifying your investments in the manner suggested by many financial advisors.
The title says it all. Valuehutr has a very generous promotion until Friday 1/22. Donate $30 or more to Haitian relief fund and he will give you his premium service. Since I have been a fan of his website and interested in trying his service and I am supportive of humanitarian assistance, this to me is a great offer. Please consider his offer and sign up if you would like to help, or even if you just want to try his premium service.
In light of the recent earthquake in Haiti and the ensuing Humanitarian crisis I wanted to address a less lucrative investment, but one that can help others in need. What do people in crisis often need to rebuild: Capital. Investors supply capital, thus humanitarian investing is not such a far fetched concept.keep looking »