Contrarian Value Ideas

[gfp927z]

Derf, On the fundamental analysis side, while us I-Hubbers have limited abilities compared to a Buffett or a professional money manager, I always do a cursory examination of the company's 'numbers', using data from Yahoo Finance. This only takes a few minutes, and includes -

Market Cap
PE
PEG
Margins
ROA / ROE
Cash / Debt
Dividend
Payout %
Shorts
Cash Flow
Revenue
Rev Growth
Net Income
Earnings Growth

Any clunkers that stand out (high debt, negative margins, shorts, etc) are noted, and too many red flags will nix the idea of owning the stock. But some sectors tend to have screwy looking numbers (finance, REITS), so these can be disregarded in the analysis. For example, REITS sometimes have a payout ratio over 100%, finance stocks often have screwy looking numbers, some industries (distributors) tend to have low margins, but high revenues, capital intensive industries can have higher debt, etc.

But for me, the trajectory and steadiness of the 10-15 year is the most important criteria for a long term buy/hold stock, assuming the 'numbers' look OK. Usually if the numbers are bad, then the chart will also not be great, which makes sense. A nice 10-15 chart is the fastest way to judge the nature of the company's business (growth or cyclical), quality of management, steadiness of earnings, etc. Some of these great companies have high valuations though (Cintas, Costco), too high for Buffett's valuation criteria, but I keep some of them in the portfolio even after Buffett has reduced his stake.




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