[ Home ] [ Up ]

1. Industry Ranking -- Restrict your holdings to companies that Value Line ranks in the top third of their industries, preferably the top 25.
2. Timeliness -- Limit stock candidates to Value Line timeliness ranking of 1 (highest growth in next 12 months) or 2 (second highest...).
3. Safety -- Select stocks that have a Value Line or Standard and Poor's Stock Reports rating of 1 (safest) or 2 (above average in safety)
4. Debt -- Select companies whose total debt is equal to no more than one third of total assets. These figures are found in Value Line and in Standard and Poor's Stock Reports.
5. Beta -- Select stocks that have a beta between .90 and 1.10 as defined in Value Line or Standard and Poor's Stock Reports.
6. Sales and Earnings -- Select companies with at least 5 good years of solid growth in sales and earnings. Small companies should grow at 12% to 15%, medium company should grow at 10% to 12%, and for large established companies, 7% to 10% is considered a good rate.
7. Stock Price -- Buy stocks that are cheap so you can buy blocks! of 100, and reduce the brokerage costs.
8. Price-Earnings Ratio -- Restrict investments to companies whose PIE ratio is at or below the 5 year average for that company (listed in Value Line).
9. Upside-down Ratio -- Try to select companies whose upside-down ratio is 3 to 1. Projected highs are in Value Line, calculation is from NAIC.
10. Management -- Select companies with a management team with solid track records. Read the business press, Value Line, analysts' reports, and materials prepared by the company officials themselves.

1. If the current price is near the five-year high, think twice before investing. If you believe in the company, watch the stock and buy it if the price falls back closer to the five year average.
2. Earnings per share should be growing at roughly the same rate as sales. If the earnings are growing faster than sales, this probably will not be the case for long. Sales drive earnings. If sales are growing faster than earnings, then the growth is not benefiting shareholders. Also, if you can purchase a share for the sum of the estimated earnings per share for the next five years, that's another positive indicator.
3. If a company is paying 4% to 6% dividends, and still has at least half of its earnings left over to invest in its business, you may have spotted a winner.
4. Book Value is based on current assets, minus current liabilities, divided by number of outstanding common shares (as found in Value Line). If the current price of the stock is much higher than book value, the stock may be overpriced. But beware, as this number may depend on a company's over or under statement of their assets.
5. Price-Earnings Ratio (discussed in The Ten Commandments)

***NOTE: Personal Preferences: Beardstown Ladies do not have a policy against buying any type of stock. But they admit they are never owned stock in tobacco or liquor manufacturers, or companies;' that make money from gambling. They do pay special attention to the way companies treat their employees, because they feel poor treatment affects the bottom line. Finally, they have never invested in an IPO.

Go to top