Robert Freedland has been a stock market enthusiast longer than he has been a practicing physician. Starting at the age of 13 with a single investment he has developed his own investing and trading strategy drawing from value and earnings momentum writers. Sharing both his passion for investing as well as politics, he started writing online in 1998 on the Delphi Boards. His current blog, Stock Picks Bob’s Advice, has been active since 2003.
1. Are you a value investor?
Quite frankly, value is an important part of my evaluation of stocks, but not the entire driving force behind deciding on a stock pick. I view myself as an eclectic investor, who is part momentum, part value, and part technician. If I can find a stock that fits my other criteria, I am reassured if I can find everything that I am seeking at a reasonable valuation. Even though I look at price/earnings, price/sales, return on equity, balance sheets, and free cash flow, probably I would be best described as a GARP investor, Growth at a Reasonable Price.
2. What is value investing?
In general, I would suggest that a value investor is someone who is interested in the intrinsic value of assets, minus the liabilities, and what a ‘break-up’ valuation might be for a company. They might be interested in buying stock in companies, as they would say, ‘under book’. I also believe that growth investors need to take into consideration valuation when making purchases which simply suggests that instead of a static, or break-up valuation, they also consider future earnings and cash flow in determining an appropriate valuation of a stock.
3. What is your approach to investing?
There really are three parts to my investment approach. First of all, I have chosen to profile the ‘perfect stock’ that meets my criteria of consistency in financial results. I like to find companies that first of all have good momentum on the day I decide to purchase them; that is, they are on the list of top percentage gainers that particular day. After that, I review the most recent quarter expecting them to have increasing revenue and earnings. If they can exceed expectations that is an added plus. Also, if they raise guidance, I give them extra “points” in my evaluation.
Next, utilizing Morningstar’s “5-Yr Restated” financial page, I check to see that revenue growth is persistent, that is it is more than a one quarter event. I also wish to see persistence in earnings growth, an increasing dividend is a plus, a stable number of shares outstanding, positive and if possible growing free cash flow, and a reasonable balance sheet with a current ratio of 1.25 or greater.
I take a look at valuation, looking for a moderate P/E if possible and a PEG between 1.0 and 1.5 if possible. In addition, I check the price/sales ratio relative to other companies in the same industry. I also review the return on equity. …Read more