Stock

[Stock]

iBox Version 2: This is a work in progress.

The intended purpose of this thread is to focus on basic fundamental analysis of smallcap and midcap (and perhaps an occasional large cap beast) that may be out of cycle or out of favor for some reason. In short, the purpose if to look for value and trade these stocks profitably.

I have personally drawn some inspiration from John Dorfman and his "Rabbit Portfolio" and "Robot Portfolio" mechanical investing methodologies. It's not a perfect strategy, but following this method, once a year, highlights sectors and particular stocks within a sector that are lagging the herd. There are many other authors and ideas on value investing. But I decided a long time ago to start there. So that will continue here.

The plan is to initially focus the board on stocks that meet Dorfman's Robot Portfolio criteria:

1. Annually
2. Select stocks with a market cap of at least $500m
3. Eliminate those companies with debt greater than equity
4. Eliminate companies with negative earnings
5. Pick the 10 stocks with the lowest PEs for the last 4 quarters.

So here's how this criteria translates into a stock screening program I use:

1. Market value greater than or equal to $500,000,000
2. Debt/Equity less than or equal to 1.0
3. P/E greater than 0.0001
4. Rank order P/E ascending

The problem I have with Dorfman's mechanical investing style is that it totally ignores technical analysis. His Robot Portfolio is tracked from a January 2 buy to a December 31 sell -- every year. It's buy and hold for a year or bust. This method has turned profits for many years running, and ain't a bad idea. But it could use some technical assistance, imo.

I'd imagine some discussion of the approach of other well known value investors -- from the Godfather of Value Benjamin Graham -- to the Oracle of Omaha Warren Buffet -- and perhaps even Richard Nixon's speechwriter, topical writer and value freak Ben Stein -- will deserve mention in this thread.

The intent is that this be a learning environment for mid term and long term investors to grow and develop a plan for managing their own money like it belonged to someone else.

There are a few rules:

1. There are no new ideas. Some of the best ideas are borrowed or stolen. But be sure and give credit when due.

2. No matter how stupid an idea may be, no insults or personal attacks will be tolerated.

3. Charts are welcome, but technical analysis is not the major focus of the thread (yet -- more as this develops).

4. I have a short attention span and sometimes need to be reminded to stay true to the course. This thread is as much for me as it is for anyone else that may be interested.

5. Your posts are welcome.

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John Dofrman's Columns on Bloomberg.com:

http://www.bloomberg.com/news/commentary/dorfman.html