1. Value Line: More than a Stock Page
Sandra F. Barlow
BIVA Board Director
Title
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2. Value Line: More than a Stock Page
Disclaimer
The information in this presentation is for educational purposes only and is not intended to be a recommendation to purchase or sell any of the stocks, mutual funds, or other securities that may be referenced.
Disclaimer
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3. Three Parts of the Value Line Investment Survey
Value Line: More than a Stock Page
Three Parts of the Value Line Investment Survey
Part I - Summary & Index
Part II - Selection & Opinion
Part III - Ratings & Reports
Most of us are familiar with the Value Line stock page. Let’s take a brief look at all three parts of The Value Line Investment Survey:
There are three parts to The Value Line Investment Survey:
Part 1: Summary & Index
Part 2: Selection & Opinion
Part 3: Ratings & Reports
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4. Value Line: More than a Stock Page
Summary & Index Part 1
Summary & Index (called Part 1) contains:
Stock market statistics and other data on the front cover (shown here).
An alphabetical listing of all stocks covered, beginning on page Look there to find page numbers
A weekly updating of most financial statistics
A variety of stock lists (usually called screens) which can provide ideas for stocks to study
Notice the boxes in the middle of the page.
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5. BI investors like to buy good solid stocks at a good price…..
Value Line: More than a Stock Page
BI investors like to buy good solid stocks at a good price…..
February 26, 2010
BI investors want to buy stock that is fundamentally sound, has good management, and also…. Buy at a good price.
This box of the Median of Estimated P/E Ratios of the Value Line stocks that have earnings is a good reference we can use when we’re considering a stock to buy. As of February 26, 2010, the median P/E of the stocks with earnings that VL covers was 16.4; 26-weeks ago, it was 15.9 so we see it’s up a bit. I find that rather encouraging. Notice the market high was July 13, 2007, with the median of 19.7, so things don’t seem to be fully recovered. The market low in March 2009 had a median P/E of 10.3, so I look at the trend and I can see HOPE! When I study these P/E ratios and compare one with another and then compare the stock I’m studying to those numbers, I can get more clues about whether my stock is a good one to buy at this point in time. We like to see how the trends seem to be going……
We know we want to buy a stock with a Relative Value below about 110 on our SSG, and I think it’s helpful to see what the median P/E is for the stocks in the Value Line universe.
If the stock we’re considering has a P/E that is close to this Value Line median, for me that is another “green light” to consider buying. If the stock I’m considering has a P/E that is twice as high as the median shown here, I would have to think very hard about whether the stock is a good value at this particular time.
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6. Estimated Median Price Appreciation
Value Line: More than a Stock Page
Estimated Median Price Appreciation
February 26, 2010
Another box I like to look at in the Summary & Index is the Estimated Median Price Appreciation Potential for the next 3-5 years of all the stocks in the Value Line universe.
Even though the price of a stock is not considered “a fundamental,” I like to see the market’s potential, according to Value Line.
Let’s remember the estimate is for 3-5 years. It looks to me that if we follow our BI principles, surely we can do better than 65% since this number is for the whole Value Line universe of 1700 stocks.
Notice at the market low March the hypothesized percentage was 180%. How many people bought when things were really low? I’m not sure we’ll get 180% on stocks we bought last year, but wouldn’t we all be satisfied with 100% or so? It will be interesting to see where we are in 4 or 5 years.
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7. Useful Screens in Part I, such as….
Value Line: More than a Stock Page
Useful Screens in Part I, such as….
Conservative Stocks
Highest Dividend Yielding Stocks
Stocks with high 3-5 year appreciation potential (2 old BI favorites)
Others
There are several screens useful to BI investors. We like to buy for the long term. You can find stocks to study further and perhaps add to your Watch List.
I notice this this February 26, 2010, edition there are two former favorites of BetterInvesting members. How many people were around in the early 90’s when a lot of us bought Technitrol? TNL I did well on Technitrol and sold when PERT indicated it was time to sell. Now I see Value Line has Technitrol on its 3-5 year high appreciation list. I’m going to look into it again.
Also, a lot of golfers know ELI, Callaway Golf stock. It’s on this Stocks with high 3-5 year appreciation potential list from Value Line also.
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8. Value Line: More than a Stock Page
Here are the screens listed.
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9. Value Line: More than a Stock Page
Partial Screen
Here is a partial page of the screen “Stocks with High 3-5 Year Price Appreciation Potential.”
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10. Part 2 Selection & Opinion
Value Line: More than a Stock Page
Part 2 Selection & Opinion
Part 2 of the Value Line Investment Survey is Selection & Opinion.
On the cover page, I like to read the commentary written by the economists at Value Line and is always worth reading. At a glance of this issue, we see there is a discussion about the business recovery that is underway, but at this point it isn’t sure that the recovery is sustainable. The Gross Domestic Product (GDP) has posted its first gain in over a year.
Although not totally pessimistic, Value Line is taking a cautious view of 2010.
Here we see listed the items in this issue.
They sometimes have a stock highlight, so if you are looking for a stock to study, here is a good place to start reading what the analysts at Value Line think of this week’s highlighted stock.
Let’s look at some of the features…….
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11. Value Line: More than a Stock Page
To go along with the discussion about the economy, Value Line shows a chart from the US Dept of Commerce. If anyone wondered about our GDP last year, we can see the trouble we were in.
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12. Value Line’s Model Portfolios
Value Line: More than a Stock Page
Value Line’s Model Portfolios
Portfolio 1 – Stocks with above average year-ahead price potential
Portfolio 2 – Stocks for income and potential price appreciation
Portfolio 3 – Stocks with long-term price growth potential
Portfolio 4 – Stocks with above-average dividend yields
Value Line’s four Model Portfolios are worth studying.
Portfolio I lists stocks they believe have good short-term (one year) potential for price growth.
Portfolio II has stocks that are of interest to those of us who are looking for income stocks with price appreciation potential.
Portfolio III is the one that many BI investors monitor because we like stocks with long-term price growth potential.
Portfolio IV features stocks with high dividend yields.
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13. Portfolio 2 Income and Appreciation
Value Line: More than a Stock Page
Portfolio 2 Income and Appreciation
In Portfolio 2 you’ll see a lot of stocks familiar to the BI investment community.
Good yield and potential price appreciation are characteristics I like to see.
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14. Selection & Opinion also lists insider transactions
Value Line: More than a Stock Page
Selection & Opinion also lists insider transactions
You may be interested: W H Gates, III sold 7 million shares of MSFT in February 2010
Insider transactions……..
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15. Section III Ratings and Reports
Value Line: More than a Stock Page
Section III Ratings and Reports
Section 3: Ratings and Reports is where we find the familiar Value Line Page. In this February 26th issue, four industries are featured, including Auto & Truck, Precision Instruments, Electric Utility (East) and Medical Supplies.
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16. Value Line: More than a Stock Page
Ranks
Chart
Statistical
Array
Analyst's
Commentary
Forecasts
Here is a sample Value Line company report.
You can see the Timeliness, Safety, and Technical ranks in the upper left hand corner.
The stock price chart is at the top of the page.
Stock price and financial forecasts appear in several sections.
Balance sheet and income statement data appear in the center.
Quarterly data are in the lower left.
The Analyst’s written commentary is in the lower right.
The format of the page is consistent so it’s easy to learn where to find the data you want.
I can’t go through the page line by line, but I’ve picked out some helpful highlights. I’ m helping out at the Registration Table this weekend, so if you have a question, you might find me there or in the Computer Lab.
BI members can download a Value Line presentation I did a few years ago which gives more detail to the stock page if you want to know more.
Quarterly
Data
Ratings
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17. Value Line: More than a Stock Page
ZMH – Top of VL page
Cash Flow
Here is the upper part of the Zimmer Holdings Value Line page.
Three prominent lines graphed are:
Monthly prices (plots high and low price)
Cash flow line (The VALUE LINE!)
Relative strength line
The heavy dark line is the cash flow line and was designed to show the “normal” value of a stock. When the price of a stock is above the line, the theory is that the price will, in time, come back down to the line. When the price is below the line, it will eventually rise back up to the line.
The dotted line toward the bottom of the graph shows the Relative Strength of a stock. It compares the price of a stock at any one time with the price of the Value Line Arithmetic Index. If the Relative Strength line is rising, the stock is acting better than the market; if the line is falling, the stock is acting worse.
The vertical bars at the bottom show volume as a percent of total shares outstanding.
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18. Value Line: More than a Stock Page
Safety Rank
Stocks ranked #1 and #2
have stronger than average finances
Have lower than average volatility
Tend to go down less than average in declining stock markets
Safety Rank Unique Value Line feature.
Most BI investors are long-term holders of the stocks we buy. We pay attention to the Safety Rank.
Stocks ranked #1 and #2 have stronger-than-average
finances.
Stocks ranked #1 and #2 have lower-than-average
volatility.
Stocks with high Safety ranks tend to go
down less than the average stock in
declining stock markets.
A portfolio of stocks with a 1 or 2 Safety Ranking
will help you sleep at night.
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19. ZMH Capital Structure Box
Value Line: More than a Stock Page
ZMH Capital Structure Box
Particularly in our present economy, we’ll want to look carefully at the capital structure of a company.
Here ZMH’s debt is 10% of their capital. That’s a healthy percentage. BetterInvesting’s guideline for debt is no more than about 33% for most companies. (There are exceptions.)
Let’s look at interest coverage.
The interest on corporate bonds must be paid as agreed. PERIOD. MUST be paid…. If a company can’t pay its bond holders, it usually has to declare bankruptcy. Interest coverage is most important.
Look at Total Interest Coverage for ZMH is 25 times. This is exceptional coverage. The company has enough to pay its debt 25 times over. If a company has less than 3-4 times interest coverage, I’d be wary to buy the stock.
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20. Annual Rates of Change Easiest place to see trends
Value Line: More than a Stock Page
Annual Rates of Change Easiest place to see trends
ZMH
This is the first thing I look at!
This is a quick way to see the trend of the business and what Value Line thinks will happen in the future.
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21. Value Line: More than a Stock Page
Questions?
end
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