Valuation methods to identify uncervalued stocks in current environment

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#1
Hi there, am thinking of building a recovery portfolio, of stocks in sectors which I assume to perform well in a recovery - Consumer Discretionary, Financials and Industrials. I assume, that current stock market prices do not yet reflect the current fundamentals of its companies, so rather rallied due to technical factors (e.g. slowdown of virus spread in some countries, stimulus programmes) and markets will decline again. Therefore, Id like to invest in tranches, but am also only want to invest in stocks, I assume to be undervalued the most. What kind of ratios and methods would you apply to find these stocks? P/E F+2 consensus vs 20yr historic value (am using F+2 as imo in current P/E and P/E F+1 Earnings are still not down enough); a floor of latest insider trades - 10% margin of safety; EV/EBITDA as for P/E vs last 20 yrs ... Which one can you think of and which ones would you recommend? Thanks and best, drdd
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#1
Hi there, am thinking of building a recovery portfolio, of stocks in sectors which I assume to perform well in a recovery - Consumer Discretionary, Financials and Industrials. I assume, that current stock market prices do not yet reflect the current fundamentals of its companies, so rather rallied due to technical factors (e.g. slowdown of virus spread in some countries, stimulus programmes) and markets will decline again. Therefore, Id like to invest in tranches, but am also only want to invest in stocks, I assume to be undervalued the most. What kind of ratios and methods would you apply to find these stocks? P/E F+2 consensus vs 20yr historic value (am using F+2 as imo in current P/E and P/E F+1 Earnings are still not down enough); a floor of latest insider trades - 10% margin of safety; EV/EBITDA as for P/E vs last 20 yrs ... Which one can you think of and which ones would you recommend? Thanks and best, drdd
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#2
(12-04-2020, 05:51 AM)drdd Wrote: Hi there, am thinking of building a recovery portfolio, of stocks in sectors which I assume to perform well in a recovery - Consumer Discretionary, Financials and Industrials. I assume, that current stock market prices do not yet reflect the current fundamentals of its companies, so rather rallied due to technical factors (e.g. slowdown of virus spread in some countries, stimulus programmes) and markets will decline again. Therefore, Id like to invest in tranches, but am also only want to invest in stocks, I assume to be undervalued the most. What kind of ratios and methods would you apply to find these stocks? P/E F+2 consensus vs 20yr historic value (am using F+2 as imo in current P/E and P/E F+1 Earnings are still not down enough); a floor of latest insider trades - 10% margin of safety; EV/EBITDA as for P/E vs last 20 yrs ... Which one can you think of and which ones would you recommend? Thanks and best, drdd
On the basis that we are only part-way into the COVID-19 pandemic and that there is a lot of financial pain yet to come, the first (but not only) metric that I am looking at is how much net cash the company holds, compared with market valuation. I want to be sure that there is a reasonable chance that anything I invest in has a decent chance of coming out of the other side of this in reasonable shape. At the moment I am not investing, other than topping up my holdings of gold mining stocks, as the sharp fall and quick bounce we have seen so far does not seem commensurate with the sheer scale of what is happening in the real economy. However, a combination of lock-down and a reduction in the amount of work that I can do from home means that I need some amusement. Doing a little background research for possible future investment helps to make the time pass.
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#2
(12-04-2020, 05:51 AM)drdd Wrote: Hi there, am thinking of building a recovery portfolio, of stocks in sectors which I assume to perform well in a recovery - Consumer Discretionary, Financials and Industrials. I assume, that current stock market prices do not yet reflect the current fundamentals of its companies, so rather rallied due to technical factors (e.g. slowdown of virus spread in some countries, stimulus programmes) and markets will decline again. Therefore, Id like to invest in tranches, but am also only want to invest in stocks, I assume to be undervalued the most. What kind of ratios and methods would you apply to find these stocks? P/E F+2 consensus vs 20yr historic value (am using F+2 as imo in current P/E and P/E F+1 Earnings are still not down enough); a floor of latest insider trades - 10% margin of safety; EV/EBITDA as for P/E vs last 20 yrs ... Which one can you think of and which ones would you recommend? Thanks and best, drdd
On the basis that we are only part-way into the COVID-19 pandemic and that there is a lot of financial pain yet to come, the first (but not only) metric that I am looking at is how much net cash the company holds, compared with market valuation. I want to be sure that there is a reasonable chance that anything I invest in has a decent chance of coming out of the other side of this in reasonable shape. At the moment I am not investing, other than topping up my holdings of gold mining stocks, as the sharp fall and quick bounce we have seen so far does not seem commensurate with the sheer scale of what is happening in the real economy. However, a combination of lock-down and a reduction in the amount of work that I can do from home means that I need some amusement. Doing a little background research for possible future investment helps to make the time pass.
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