/biz/ - Business & Finance

>>18402178
>>18402445
Now here's another interesting screen that I ran. In addition to searching for the stocks with the lowest available PE ratios, I also was curious what would happen if I added combined that with some additional metrics of value. For instance, besides PE ratio, what about price to book? Ideally I don't want to just be buying the future earnings at a discount. As a stockholder, I'm purchasing a share of the business, and I also want to be buying the business's assets at a discount too. This is probably a less important consideration, as the long term earnings yield, and therefore the long-term return on investment, is the inverse of the PE ratio, but ensuring that one is not overpaying for the assets offers at least a small margin of safety. So I was conservative here and stuck with a PB ratio of less than 1. One problem resulting from this additional criterion was that it ended up including more financial companies than I liked. You don't think about it, but these companies probably have grossly overvalued assets on their books (e.g. mortgages that people are going to stop paying) that pump of the book value over what the assets are actually worth. So I decided to add some additional value criteria to try to filter those losers out, with some success. There are some financial companies remaining here, but hopefully the additional filter criteria add enough of a margin of safety that we can not be too bothered by their presence.