What's the simplest way to find beaten up (value) stocks?

[NormR]

IIRC, Peter Lynch also said to look for low institutional investing.

I didn't catch in the article what the parameters were for the case of low or high IO.
What is considered high IO, 50%, 75%?

They did a decile analysis. The very lowest group tended to be microcap names (< 20 million). But the results extended to higher IO groups (and higher market caps) but the premium declined.

[Taggart]

The Wall Street Journal

THE INTELLIGENT INVESTOR
By JASON ZWEIG

Stop Worrying, and Learn to Love the Bear

Take It From Graham and Buffett,
These Miserable Markets Are
A Gift From the Financial Gods
July 12, 2008; Page B1

When you bought into the gospel of "stocks for the long run," did you have any idea how long the long run can turn out to be? Exactly 10 years ago, the Standard & Poor's 500-stock Index was at 1164; it closed Friday at 1239. That's an annualized average return of 0.63%. At that rate, it will take you 111 more years to double your money in the stock market.

Meanwhile, this newspaper, and most of Wall Street, has declared that stocks have officially entered a bear market now that the Dow Jones Industrial Average is 20% below its record high of last October. I think that's poppycock. We've been in a bear market for years; the Dow was almost 600 points higher in early 2000 than it is today. What about that 10% yearly return that U.S. stocks supposedly provide with near-certainty? To earn a 10% long-term return, according to Morningstar, you need to have bought at least 19 years ago and held on ever since.

Could things possibly get worse? I don't know, but I am an optimist -- so I certainly hope things do get worse. Nothing else should satisfy an intelligent investor.

This May, at the Berkshire Hathaway annual meeting, Warren Buffett boiled down what it means to be an intelligent investor into two startling sentences: "If a stock [I own] goes down 50%, I'd look forward to it. In fact, I would offer you a significant sum of money if you could give me the opportunity for all of my stocks to go down 50% over the next month." Knowing he owns good businesses, Mr. Buffett wants prices to go down, not up, so he can buy even more shares more cheaply before the bounce back.

In the last long bear market, 1969 to 1982, stocks returned just 5.6% annually; after inflation, investors lost more than 2% a year. That mauling by the bear made stocks so inexpensive that over the ensuing 18 years they went up 18.5% a year, enough to turn $10,000 into more than $200,000.

The people who so far this year have yanked $39 billion out of U.S. stock funds, and $6 billion out of exchange-traded stock funds, do not understand this. But if you are still in your saving and investing years, a bear market is a gift from the financial gods -- and the longer it lasts, the better off you will be. Instead of running from the bear, you should embrace him.

This new column takes its name from the classic book by Benjamin Graham, who wrote that "the investor's chief problem -- and even his worst enemy -- is likely to be himself." I hope to help you understand the chaotic markets around you, and the even more treacherous enemy within. For, as Mr. Buffett has also pointed out, investing is much like dieting: It is simple, but not easy. Everyone knows what it takes to lose weight. (Eat less, exercise more.) Nothing could be simpler, but few things are harder in a world full of chocolate cake and Cheetos.

Likewise, investing is simple: Diversify, buy and hold, keep costs low. But simple isn't easy in a market seething with "free" online trades, funds that promise to transform losses into gains, and TV pundits who shriek out trading advice as if their underpants were on fire. The real secret to being, or becoming, an intelligent investor is bolstering your self-control.

So, in these columns, I will seek to combine the wisdom we can glean from Graham with the latest insights from psychology, neuroscience and behavioral economics. The result, I hope, will be practical advice that can increase your odds of reaching your financial goals.

For now, bear this in mind: That which does not kill investors makes them stronger. Physiologists have shown that minuscule doses of poison may actually make organisms (including humans) healthier, a phenomenon called hormesis. I do not recommend seasoning your food with cyanide.

But the findings on hormesis do remind us that painstaking investors -- literally, those who can take the pain of a bear market that seems to drop another 1% every day -- will ultimately triumph, by patiently amassing greater and greater equity positions at better and better prices. The ancient King Mithridates of Pontus is said to have made himself immune to poison in constant gradual doses, a tale retold by the poet A.E. Housman:

They put arsenic in his meat
And stared aghast to watch him eat;
They poured strychnine in his cup
And shook to see him drink it up....
I tell the tale that I heard told.
Mithridates, he died old.

Write to Jason Zweig at jason.zweig@wsj.com

[randomwalker]

Was sifting through the rubble of decimated US "value" funds and noticed that AGF's US Value Class down 42% one year had just over 7.5% of the fund spread between Fannie Mae (FNM) and Freddie Mac (FRE) as of 30-APR-2008 according to GlobeFund. The rest of the top ten holding were not helping.

WB-N Wachovia Banks 6.64% -78.03
BAC-N Bank of America Banks 6.42% -56.25
USB-N US Bancorp Banks 6.02% -22.31
C-N Citigroup 5.77% -69.36
ALL-N Allstate Corp. 5.03% -28.13
EK-N Eastman Kodak Misc. 4.74% -52.48
KEY-N Keycorp Banks 4.73% -71.94
COP-N ConocoPhillips 4.7 % -0.58
FNM-N Fannie Mae 3.93% -84.55
FRE-N Freddie Mack 3.67% -87.34

[NormR]

U.S. value has been slaughtered over the last 12 months.

[randomwalker]

U.S. value has been slaughtered over the last 12 months.

Yes, that why I'm there looking for babies thrown out with the bathwater.

Always wondered what it would be like to be a financial planner with a sales pitch that goes like this.

"I really think we should be getting into this fund here, why it was down 40% last year alone." lol

[randomwalker]

U.S. value has been slaughtered over the last 12 months.

Bring Out Your Dead/ US Value Managers

http://www.youtube.com/watch?v=grbSQ6O6kbs

[oldguy]

Mr. Buffett wants prices to go down, not up, so he can buy even more shares more cheaply before the bounce back.

I thought that M. Buffet was strickly in fundamentas not in market timing

[Taggart]

Mr. Buffett wants prices to go down, not up, so he can buy even more shares more cheaply before the bounce back.

I thought that M. Buffet was strickly in fundamentas not in market timing

If Buffett finds the investments that fit his parameters of value, then he buys. Otherwise, he lets the cash build up.

[Taggart]

U.S. value has been slaughtered over the last 12 months.

True enough.

July 12, 2008

"There's a fine line between stubbornness and discipline," said , chief investment officer at Litman/Gregory, a firm that advises investors and has been having second thoughts about some big names. "We're in the process of reassessing these managers we've had long-term relationships with."

May 1, 2000

He and Sanborn, it seems, would have been better off if they'd abandoned their beliefs and staked every dime on one juicy tech stock with no earnings.

[Taggart]

Value ideas in international stocks you may want to do some research on:

Buy On Weakness

The value stocks favored by Tweedy, Browne haven't done very well lately. But if you are a true believer in value, that's all the more reason to be buying those stocks now.

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Cheap ADRs

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In Search Of Yield

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Seven Cheap Global Stock Picks

[oldguy]

On TSX 60

[Taggart]

Thursday, July 31, 2008

Value managers take it on the chin in volatile markets

JOHN HEINZL

Being a value investor is a tough job at the best of times. Lately, it's been nothing short of excruciating.

[chiaroscuro]

There are going to be a lot of value stocks for the picking shortly. The problem will be weeding out the losers. Hint: avoid US banks.

Each to his/her own. Not all U.S. banks have been hit by the present problems, so I would amend it to avoid certain U.S. banks, and that would also include some (but not all) of the ADR's for European financial stocks.

eh-hhhh---hhmm. Was I right or was I right? I'd still avoid them...there is value and then there is getting your teeth kicked in.

[Mike Schimek]

Got my eye on Goldman Sachs... I want to jump in but the sector scares me, so I'm sitting on my hands. Nice play with Sandvine Chi. Was considering buying some but whenever I buy something I don't know well I feel like throwing up, and was too lazy to put the time into researching that pick of yours.

[Taggart]

The Times (UK)

August 2, 2008

Market-beating tactics may be well proved, but timing is all

Companies with high levels of financial gearing are always vulnerable as economic growth slows: the requirement to service debt through interest payments creates an additional layer of fixed costs and so increases operational gearing, whereby a fall in sales translates into a disproportionate fall in profits. The credit crunch has heightened the peril. Additional capital has become more expensive to secure or is simply unavailable.

Indeed, Morgan Stanley contends that, although there are broadly seen to be two styles of investing – value and growth – the present bear market has brought a third into play: a focus on balance sheets. Just as value investing (the search for low earnings multiples and high dividend yields) dominates the early stages of a bull market and growth investing (a focus on above-average increases in earnings) characterises its coming of age, so an attention to financial leverage becomes the overriding trait of a falling stock market, says the US investment bank. So much so that if a company’s balance sheet is weak, traditional valuation multiples are deemed of little importance.

[Taggart]

August 04, 2008

New Investment Guideline: Find Companies That Will Still Exist a Year from Now

Balance sheets are the new income statements.

[Taggart]

From Kiplinger's Personal Finance magazine, September 2008

Fairholme's Bargain Hunter Shifts Gears

Fairholme is down, but not nearly as much as the overall market. Energy stocks have energized the fund's returns for years. But now, Fairholme's lead manager, Bruce Berkowitz, a dyed-in-the-wool value investor, thinks it's time to take some of the chips off the table.

[Taggart]

Kiplinger

Sell Energy, Buy Health

Fairholme, a superb fund, is shifting out of commodities and into drug stocks and managed-care companies. The timing looks perfect.

August 12, 2008

[Taggart]

Wall Street Journal

OCTOBER 2, 2008

Lessons From the Market Fall

Successful investing is counterintuitive. Want proof? Consider how some "risky" and "safe" securities have recently performed.

[chiaroscuro]

What's the simplest way to find beaten up (value) stocks?

1) Get the newspaper's stock listing page. 2) Staple it to the wall. 3) Throw dart to choose stock.

[augustabound]

1) Get the newspaper's stock listing page. 2) Staple it to the wall. 3) Throw dart to choose stock.

Burton Malkiel calls that technical analysis.

[blackball]

1) Get the newspaper's stock listing page. 2) Staple it to the wall. 3) Throw dart to choose stock.

Burton Malkiel calls that technical analysis.

Isn't that in the training manual for fund managers?

[blonde]

What's the simplest way to find beaten up (value) stocks?

When/If ya'lls do not know 'what' to do...immediately, DO NOTHING... consider a start by investing the time and effort to Study-the-System re: stock... with a desired outcome to get the most with the least amount of Money and cycle time. 'WHO' U know pays MEGA than 'WHAT' U know. The aim is to gain the 'wisdom' shared by the few when Money-Talks with CASH.

Financial noise is a red-herring, available to the masses for their decision making process...Everybody's in Sales...Marketing is effective with GIGO. It is easy to crank the organ and watch the monkey dance. IOW, cycle-time is a driver in all means to Mega-Money. At the end of the 'Game' it is obvious 'WHO' knows when to hold and when to fold. The nice thing about most of the 90%ers...there is a lot less pressure on 'ems and most of the time 'ems will get it wrong. Such-is-life.

In this day and age, with the NEW-Global-Economy, as per plan, the Monster is in charge of 'eir food-supply.

[parvus]

Five-alarm value investing

Value investing these days is a lot like firefighting. With everyone fleeing the credit market inferno, value investors are rushing in to save anything worth saving.

But as the flames spread they’re getting burned. So far this year losses for most pure value funds are well into the double digits – with most of the damage being inflicted over the past 30 days.

“People are fearful, people are uneasy, and that’s a situation where a value manager should be happiest” says Rory Flynn – a Dublin-based value investor who manages about $5-billion for AGF Funds Inc.

His flagship AGF Global Value fund is down 25 per cent this year but that isn’t stopping him from shopping for bargains with low price-to-earnings ratios and high dividend yields. “There’s a collection of companies that have made it through the recent market and are perceived as the strong and the solid,” he says.

Mr. Flynn has been bulking up positions in the hardest hit companies including BNP Paribas SA, Bank of America Corp., JPMorgan Chase & Co. and non-financials like pharmaceutical giant GlaxoSmithKline PLC.

Value investors invest from the bottom up – focusing on the balance sheets of specific companies before evaluating their sector, region or the broader markets and economy. Mr. Flynn says he’s finding the best deals in the European financial sector. “Europe has delivered a higher level of earnings growth than the States in recent years and these sorts of economic crises don’t seem to get in the way of European companies making money” he says.

[Small Investor Activist]

My list of beaten up U.S. value stocks is for sale. Here's a sampling:

Supervalu
Arkansas Best
American Greetings