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See the afl below. Maybe someone with more experience could complete
this with buy/sell signals and the other requirements defined.
Did an Explore and found 6 stocks from the Russel 2000 on 12-05-06
that met this requirement.
CQB 12/5/2006
LEV 12/4/2006
LFG 12/5/2006
OHB 12/5/2006
STC 12/5/2006
STTX 12/5/2006
AFL below
//Cherry 12-02-06 S&C Dec 2006 Page 38
SharesOut = GetFnData("SharesOut");
SalesPerShare=GetFnData("SalesPerShare");
BookValue = GetFnData("BookValuePerShare");
EPS = GetFnData ("EPS");
EPSEstCurrent = GetFnData("EPSEstCurrentYear") ;
EPSEstNext = GetFnData ("EPSEstNextYear" );
ReturnOnEquity = GetFnData("ReturnOnEquity");
GrossProfit = GetFnData("GrossProfitPerShare");
ProfitMargin = GetFnData("ProfitMargin");
OneYrTarget = GetFnData("OneYearTargetPrice");
Dividend = GetFnData("DividendPerShare");
PE = Close / EPS;
MarketCap=SharesOut* Close;
AnnualRevenues=SalesPerShare*SharesOut;
DividendYield=(Dividend / Close) * 100;
Filter= ((((Close >10 AND Close< 100) AND MarketCap>0 AND
SalesPerShare>0 AND BookValue>0)
/*
? The market capitalization rate (defined as the number of
shares outstanding times the stock price) compared to
annual revenue is a first consideration. if the value of
outstanding shares times price exceeds corporate annual
sales, the stock is expensive AND should be avoided.
Example: 30 million shares outstanding x a price of
$13 = $390 million compared to annual revenues of
$575 million. The stock is a potential Buy.
*/
AND (AnnualRevenues>MarketCap*1.5)) // Vary number
/*
? A company's net worth (shareholders' Equity) divided
by the number of shares is defined as book value. A
stock worth buying should Sell around book value OR
about 1.5-1.7 times book value. A higher value incurs
too much risk.
Example: The recent price of a stock is $20. The book
value is 31 OR 1.55 x the stock price of $20. The stock
is a potential Buy.
*/
AND (Close*1.1<BookValue)) // Vary number
AND DividendYield>0.5; // vary number
AddColumn (Close, "Close", 1.2);
AddColumn (Marketcap,"MarketCap",1.0);
AddColumn (SalesperShare,"SalesPerShare");
AddColumn (SharesOut,"SharesOut",1.0);
AddColumn (AnnualRevenues,"AnnualRevenues",1.0);
AddColumn (BookValue,"BookValuePerShare",1.2);
AddColumn(DividendYield,"Dividend Yield",1.2);
/*
S&C Dec 2006 Page 38
MINIMUM EFFORT, MAXIMUM return
What factors can small investors who desire to make
investments AND manage their portfolios personally focus on
to minimize time AND effort AND maximize investment return
over a one- to two-Year investment time frame? I have been
investing for more than 20 years, AND a few select factors, it
is clear to me, may be utilized as a minimal set of conditions
for selecting investments. These factors may include, but are
NOT limited to, beta, diversification, AND dividends.
Understanding complexities such as volatility, trend, structure
of averages in the stock market, AND so on, is more appropriate
to High-level, advanced trading. Formula plans based on such
factors as price/earnings (P/E) ratios, AND other statistics can
yield decisions such as selling OR buying under specified
conditions, such as buying at 10 times earnings AND selling at
20. for the small investor, this type of data must be simplified
based on the constraints of time allowed for portfolio review
AND management.
THE FUNDAMENTALS
? The market capitalization rate (defined as the number of
shares outstanding times the stock price) compared to
annual revenue is a first consideration. if the value of
outstanding shares times price exceeds corporate annual
sales, the stock is expensive AND should be avoided.
Example: 30 million shares outstanding x a price of
$13 = $390 million compared to annual revenues of
$575 million. The stock is a potential Buy.
? A company's net worth (shareholders' Equity) divided
by the number of shares is defined as book value. A
stock worth buying should Sell around book value OR
about 1.5-1.7 times book value. A higher value incurs
too much risk.
Example: The recent price of a stock is $20. The book
value is 31 OR 1.55 x the stock price of $20. The stock
is a potential Buy.
? The value of the P/E ratio versus rate of earnings growth
should be determined. if the P/E is NOT more than a third
to half of the projected five-Year earnings growth rate, the
stock can be considered safe. You should NOT pay more
than 20-25 times earnings for a stock. This is a difficult
scenario in an overvalued stock market AND requires
diligence in finding the right company's stock. In today's
market, it may be necessary to go to 30, but NOT over, for
a small investor.
Example: EPS is 1.55 in the Year 2005. The EPS in
2000 is 1.14. (1.55 - 1.14) /1.14 = 0.36 OR 36%. The
P/E of the stock is 12, a third of the EPS growth, AND the
stock looks promising.
Other considerations might include the following:
? P/E ratios should be less than OR equal to the
average highs over the last three years.
? The stock price should be less than OR equal to
three-quarters of book value per share.
? The ratio of current assets to current liabilities
should be greater than OR equal to 2.0.
? The ratio of total debt to stockholders Equity
should be less than OR equal to 1.0.
? The EPS growth should be 10% of compound
annual growth for the last 10 years.
Some industry groups have run into subtle issues, the first
example of which was the steel industry in the late 1970s, AND
Now the automotive companies. The impact of pension costs has
a significant impact on stock performance. while certain
automotive companies are recommended, such investments
would be out of the question for a small investor due to unusually
High pension costs that will affect company performance overall.
? A last consideration that might be employed is to
ascertain the value of the firm using the Gordon model
(VB) defined as:
VB = (Next Year's dividend) / ((required rate of return)
- (estimated long-run dividend growth))
VB should be approximately equal to EPS.
^ Always look for a company stock that pays a dividend.
? Diversification is inherent in this model, as the industry
is NOT analyzed directly. Only the data for a selected
company in an industry group is analyzed. Obviously,
you would NOT build an investment portfolio with stock
selected from only one industry.
A HYPOTHETICAL SCENARIO
As an example, say you have selected a stock with a recent
price of 13, a P/E of 11.5, AND a dividend yield of 0.9%. The
market capitalization is $360 million AND the revenue is $3.2
billion. The book value is 21.5 AND the recent price is 13. The
P/E ratio vs. rate of earnings growth is 38%, Close to our
specification of a third of the P/E.
The stock does pay a dividend. You will find there is no
merger OR acquisitions that would add an element of risk.
Pension costs are NOT prohibitive. You decide to purchase 200
shares of the stock through an Internet Low-cost broker. Since
there is little additional time, you ascertain that the current
assets/current liabilities are less than 2.0; the ratio of debt to
stockholders Equity is less than 1.0; AND the stock price of 13
is less than three-quarters of the book value per share of 22.
December 2006 ? Technical Analysis of STOCKS & COMMODITIES ? 39
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