I have been trying to find a program that screens for value in a truly useful manner. I am a veteran investor—43 years! When you screen for low price-earnings, price-to-book and price-to-cash-flow ratios you get nothing, most of the time, but cheap stocks that are as often as not going to stay cheap.
The most helpful way to screen for value is to look for stocks that are cheap using these metrics within a historical framework. I want to know which stocks are now in the lowest 10% of their 15-year range of price-to-book ratio and price-to-cash-flow ratio. Thus, Alcoa may be cheap at 0.9 times book and Patterson Dental at five times book. I don’t include the price-earnings ratio since it doesn’t work for cyclical stocks and cash flow is better anyway.
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