Value on the Move--PEG With Est Growth Screen

Performance

  Value on the Move--PEG With Est Growth S&P 500
YTD Return: -3.3% 1.3%
Five Year Return: 25.6% 18.6%
Ten Year Return: 14.9% 5.2%
Inception: 19.7% 4.1%
Data as of 3/31/2014
The Value on the Move--PEG With Est Growth Screen represents AAII's interpretation of the investment approach and is not determined by the original strategist. The list of passing companies represents a hypothetical portfolio, which is used to track the screen’s performance on a chart.

Passing Companies

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Screening Criteria

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Chart

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Investors are engaged in the battle of trying to buy low and sell high. Strategy and tactics are critical elements in this struggle. Growth strategies have done well recently, but long-term studies still point to successful investing results by following a disciplined contrarian, value-driven strategy. Value investors argue that while the market may be efficient in the long term, emotions often dominate in the short run. These emotions can overtake rational analysis, pushing a stock's price above its intrinsic value during periods of euphoria and below its true worth when reacting to bad news.

Value screens, such as the price-earnings ratio screen, typically look for low prices relative to actual measures of company performance or assets. The price-earnings ratio, or multiple, is computed by dividing a stock's price by its most recent 12 months' earnings per share. The price-earnings ratio is followed closely because it embodies the market's expectations of future company performance and risk through the price component of the ratio and relates it to historical company performance as measured by earnings per share.

A simple search for low price-earnings ratios, however, can be misleading as a screen for undervalued stocks. Typically, firms with high growth potential trade with correspondingly high price-earnings ratios, while those with low price-earnings ratios are expected to have low growth or high risk. Screening just for stocks with a low price-earnings ratio may leave you with a list of companies with little or no growth prospects or great uncertainty regarding the prospects of the firm. This screen will explore some of the basic techniques used to combine value and growth measures to identify companies experiencing growth.

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