I have belonged to NAIC for 10 years and am active in 2 clubs. So, I am familiar with the SSG. It is designed to tell you a decent price for a stock that has good fundamentals. But, it is only a screening tool. And, there are some weaknesses. On the SSG debt is not considered. Most people use the 5 year earnings projection from the Value Line page. How reasonable is this? The whole area of earnings calculation is suspect just now. S&P has just introduced a new method of calculating core earnings. It is much more strict. It was written up in last weeks's Businessweek. If S&P is correct, reduce VL's estimate by 30%. In this market I have switched to evaluating stock prices on the basis of dividend yield instead of PE. The dividend is REAL money. The E in PE seems unreliable. Even if the dividend yield is low, it means the company has faith enough in real earnings that it believes it can pay it. If dividends have been paid for a number of years and raised periodically, that is a sign of strength. In deciding what price to pay for the stock, look at the company's yield range the same way you look at PE range on the SSG. Buy when the price is near it's highest yield. This, too, is a tool and it is important to consider the quality of the company's products or services and it's competitive advantage. Just my thoughts. Like everyone else, I'm struggling. I like JWA's numbers and competitive position. Have not checked its yield range lately, but think it is near a buy point because of the drop in the stock.
I plan on staying and will watch what is posted. I will also ask when that question comes to mind. If you read the series that was posted between the two of us earlier we got to where we needed to be. I need more information and am learning as I go.
In reading this post there is information that I can start dealing with. I had hoped that there was help beyond the SSG and you have provided some of that help.
If you look at the posts from Leewalter we also got to the point where there was information that was a help. What I have come to is that a person if they are using any wisdom at all takes the tools they have, runs the figures, determines the facts evaluates them in the best light and makes a decision. I have not come to the point where I feel I have enough of experience to use what I would call valid judgement.
What judgement tells me about this stock is that it is solid, international, widly held, established, and showing income. There also appears to be some agressiveness in the future plan in that they are looking to purchase others, move from the printed page to the online page, and have taken more then a few small steps to modernize.
What I do not know is who is running the ship. Is mgmt still family, second or third generation or is there a non-family CEO on board who has enough control to set direction? In research I have become aware that when a small company starts to build momentum the original owner or the creator of the business is good at making product or building a business but is not necessarily the best in keeping business, building beyond a certain span of control etc. At some point if a company is to expand then there is a need to find a true manager. Has this company made that transition? If so where do I find that information? Thanks for the assistance. I know that the conversation will get better and it just started. I'd like to hear more.
Good question. Sometimes the family guy is not very good and sometimes so well trained by papa that he is great. I'm thinking of Shelby Davis and his son, Chris Davis. (New York Venture fund and Selected American Shares) Chris is 3rd generation and very competent. His grandfather started the business. Maybe you should write to Better Investing and ask them to include comments on the quality of family/non family managementwhen they offer a Stock to Study. It would also be neat if they would also comment on the quality of the Board members. But, the NAIC guys are numbers guys. They will probably tell you that Line 2B (ROE) answers your question. I don't agree with that. Another item not on the SSG is the trend in % Profit growth. And that is important. Do you do much with outliers on the SSG? I.E., throwing out PE ratios that are such exceptions to the rule for that company that they should not be included. P. 39 of Dec. issue of BI in a summary of a talk given by Gary Ball (good teacher) at the NAIC convention, he gave a judgement detail new to me. If a high PE is due to a drop in earnings, he eliminates it. Maybe next week I will update my JWA SSG and come back to this board and report anything I see that may be interesting. Oyster