Ask Colin

VALUE MODEL

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  1. How can I spot accumulation and distribution on stock charts?
  2. Are there any books that explain the reasons behind the value model?
  3. What are your rules of thumb for PE ratios?
  4. How effective is the 52-week new highs scan towards the end of a bull market?
  5. Do you look at rate of return and projected rate of return in choosing stocks?
  6. You teach how to find value stocks. However, this only applies to industrials. How do you find resource value stocks?
  7. I have done a low PE scan at late December 2003 and most of the stocks with promising PE ratios do not have pretty chart patterns. Do you agree?
  8. You look for Price to NAB multiples of 1.0 or less for value stocks. Would it worry you if the multiple was negative?
  9. Would it worry you if a PE ratio was negative?
  10. You look for a PE multiple less than 10 for a value stock. Would it worry you if the multiple was as low as 1.5?
  11. For your fundamental scan do you still use PE Ratio, Dividend Yield and Price/NTA filters?
  12. Why don't you use a scan based on PE ratio, Dividend Yield and Price/NTA to find value stocks among resources and trusts?
  13. In light of changing market conditions, are you using PE5 and P/NTA
  14. What do you mean when you say a stock is a "value" stock?
  15. Are your value and growth models applicable to all market conditions and if not, when are they best used?
  16. How many stocks should I expect to find in a value scan and does it alter with market conditions?
  17. What bond rate do you use for your PE ratio scan, as described in your mini course?
  18. Should PE ratio filter rules for blue chip stocks be set higher to allow for greater institutional demand?
  19. Is the value model best used after a market correction?
  20. You filter stocks in consolidation with PE ratios below 10. But won't all stocks that have fallen have low PE ratios?
  21. When is the best time to do a scan of fundamentals looking for value stocks?
  22. In assessing the fundamentals of a company, using the value method, what should I look at?
  23. Is it necessary to do the same level of analysis as a stock broker's analyst might do to follow the value method?
  24. With respect to the 3 fundamental filters of your Fundamental Value Scan: P/E ratio of 10 or less: For good or ill, there are less and less companies that pass that first filter at the present time (Late December 2001). This means that there are less and less companies that one can choose from to trade in. I wonder if perhaps your notes may have been written at an earlier time, when companies exhibiting this filter were more numerous. Or do you still stick with this filter? Dividend yield 5% or more: Much the same comments apply to this filter as well. You are happy to continue with this value?
  25. From my archives of about 30 years ago, I came across the following published once as the golden rule of trading. What do you think? Calculate the result of Price/Net Assets ratio multiplied by Price/Earnings ratio. If result is less than or equal to 10, BUY. If result is greater than or equal to 25, sell. I like rules that minimise the thinking effort.
  26. I have just finished reading your Research Report No 1 on combing FA and TA, which I found very informative. I find it difficult to understand how one can rely on dividend yields and PE's, which are based on earnings calculated up to 6 months or more previous for the filters. The dividend yield is obtained by dividing the DPS by the present market price of the share. Hence, if the share has dropped in price, the yield would be increased and in a similar manner the PE would be decreased. This would give a false positive aspect to the stock. The situation would soon be obvious when the chart is observed, so does this indicate that only shares with a positive trend should be considered in the filter list?
  27. When looking for value stocks, what do you look at being the minimum volume normally traded per week or month, before even considering to trade the particular stock?
  28. Kenneth Fisher talks about using Price:Sales ratios and buying stocks with PSRs of .75 or less and selling when PSRs rises between 3 and 6. He believes that the PE ratios are relatively unimportant and that PSRs are more important. Have you ever used PSRs?
  29. 5% apply to only fully franked dividends?
  30. You have recently emphasized towards more defensive stocks in view of the market conditions. You have mentioned P/E's and dividend yield as specific criteria to use. Do you use historical or prospective numbers?
  31. The value investing style seems to be dead. Can you recommend a seminar on trend trading?
  32. In your article Trend Trader in Shares, July 2001, you mentioned in one of your points in your stance in the Australian market that you "focus this exposure on defensive situations. Defensive means they have lower than average p/e ratios and higher than average dividend yields." Is the comparison with the overall market, within the sector or historically for the stock itself, or a combination of all 3 with equal or different weights of importance ?
  33. I have read recently the following comment, "In fact value stocks have outperformed growth shares for the past three out of five weeks after grossly underperforming for most of April and the beginning of May." This was in reference to US market. Could you please be so kind and explain what is the difference between the "value" and "growth" stocks? What parameters "decide" if it is "value" or "growth" stock? Can one stock change from "value" to "growth" and vice versa?
  34. Concerning your Research Report No 1 Combining Fundamental and Technical Analysis (No longer published, but now incorporated in my Seminar Notes under Stock Selection - Colin): Most disconcerting of all are the stocks filtered out of your list that have experienced substantial price growth during the last 12 months.
  35. Concerning your Research Report No 1 Combining Fundamental and Technical Analysis (No longer published, but now incorporated in my Seminar Notes under Stock Selection - Colin): What was of concern, as much as other factors, was the prevalence of illiquid stock in you accept list.
  36. Concerning your Research Report No 1 Combining Fundamental and Technical Analysis (No longer published, but now incorporated in my Seminar Notes under Stock Selection - Colin): I recently carried out a quick review of the fortunes of your filtered accept list and it does not look all encouraging, only two showing sustained and credible positive price growth and a further two showing marginal positive change.
  37. How do you determine if a stock is undervalued by the market?
  38. Do you continue to hold stocks in a bear market and would you include any growth stocks?
  39. A friend gave up dairy farming to invest in shares, buying low PE and high dividend yield stocks. I also bought some, but my choices did not perform. Will your seminar tell me what I was doing wrong?
  40. In your value method you make it clear that the model is for Industrials only. Is there a model for mining stocks?