by KenFaulkenberry | Jun 21, 2015 | Investment Analysis
As value investors, one of our most important rules is to avoid incurring large losses. There are two easy ways to subject yourself to possible large losses; buy stocks for more than they’re worth, and buy stocks of companies that go bankrupt. The Altman Z-Score is a formula of 5 basic financial ratios to help determine the financial health of a company. In particular, it is a probabilistic model to screen for bankruptcy risk of a company.
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by KenFaulkenberry | Mar 14, 2015 | Value
There is a debate between two approaches among investors: qualitative vs. quantitative. In reality, every investor adopts at least a little of both approaches; but may emphasize one or the other. The qualitative approach concentrates on the quality of the company. Emphasis is put on the company’s products, services, management, competitors, etc. A quantitative approach concentrates on the income statements, balance sheets, and cash flows, and analyzes the relationship between price and intrinsic value .
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by KenFaulkenberry | Nov 22, 2014 | Investment Analysis
The Graham Number is part of Benjamin Graham’s stock screen for dividend investors. It uses price in relation to earnings and book value to identify the relative valuations of stable dividend stocks.
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by KenFaulkenberry | Nov 16, 2014 | Investment Analysis
Return on capital ratios provide the value investor with quality metrics that can be employed after, or along side, valuation metrics. This allows the long term investor to look for “wonderful companies at a fair price” (Warren Buffett).
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by KenFaulkenberry | Nov 9, 2014 | Investment Analysis
Return on Total Assets Ratios provide analysts with an indication of management efficiency in utilizing company assets to create profits. Because it includes all (total) assets (assets funded by debt and equity) it is a profitability ratio that interests both creditor and equity stakeholders.
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