A.I.M. Users Bulletin Board

[OldAIMGuy]

Hi Allen, Re: P/E and Relative P/E from Value Line.........

"So a P/E of 100% is not good for AIM? I'm not sure I follow."

If the industry P/E is 18 and the stock you're studying has a P/E of 18 then the "Relative P/E" = 1.0 - same as the group.

So, if QCOM has a P/E of 11.3 and the Telecomm Equip industry has a P/E of 18, then QCOM has a Relative P/E of 0.63. That would indicate that it is relatively cheap to buy a dollar's worth of earnings compared to the average company in the group.

Here's an ancient AIM User's page that might help:
http://web.archive.org/web/20120609071221id_/http://www.aim-users.com:80/vlis.htm
It takes a Value Line page and highlights the various things I look at when picking an individual company stock. It helped me pick the most compatible stock for AIM out of a specific industry, too. For instance, if we look at the telecomm equip sector, which stocks besides QCOM would look the best using this method of analysis and Value Line's pages?

There are about 85 companies listed in VL in this sector. Which one is "best?" Which one would be best for AIM? The answers for Mr. Buynhold might be different from what Mr. AIMuser decides.

Further, if one is focused on total return, maybe one stock with a higher dividend would influence the decision of one AIMer over another. Both might like the same short list of stocks for their AIM portfolio, but might pick different ones based upon overall goals (price appreciation + dividends + AIM trading).

A quick look through Value Line's Telecomm sector using some of the above selection process narrowed the list of 85 companies down to around 10 possible candidates. At that point, one would study each company individually to see if one could divine which one would give the best results when using AIM.

Hope this helps. Value Line paper version is available for free in most public libraries of reasonable size.