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Lessons from my Favorite Book for Value Investors

Tracey Ryniec
  • (0:40) - Value Investing For Beginners: A Little Book of Value Investing
  • (4:30) - What Does It Mean To Be A Value Investor?
  • (14:50) - A Complete Value Investing Stock Screener
  • (18:30) - Tracey’s Top Stock Picks
  • (28:05) - Episode Roundup: GIII, PVH, GM, LM, MNK, UNFI
  •                 Podcast@Zacks.com

A top book for beginning investors to consider is “The Little Book of Value Investing” by Christopher H. Browne.

Published in 2008, it’s just 208 pages and is, literally, “little”, so it can be read quickly, on either the bus or the subway in just a few trips.

It provides great tips and tidbits for value investors including the key chapters on how to research a company through its financial statements, before buying.

Lessons Learned from the Book

1.       Chapter One says it all: “Buy Stocks Like Steaks…On Sale.”

2.       Buy earnings on the cheap

3.       Buy when the insiders buy

4.       Ask more questions about the business, such as what is the product growth, competition, cost control?

Screening for Classic Value Stocks

Once you read the book, you’ll want to find some value stocks.

Zacks.com has a great classic value stock screen which applies the Zacks Ranks of #1 (Strong Buy) or #2 (Buy) along with P/E, PEG, P/Cash Flow, P/B, and P/S ratio.

This is a narrow screen but it still returned 15 stocks.

5 Stocks with Classic Value Fundamentals

1.       G-III Apparel Group GIII is one of the largest apparel and accessory retailers in the United States. Its brands include DKNY, Donna Karan, Karl Lagerfeld, Calvin Klein, and Tommy Hilfiger among others. It operates its own stores and sells wholesale to specialty and department stores. Earnings are expected to grow 15.4% in fiscal 2020. It’s cheap, with a forward P/E of 12.5.

2.       General Motors GM is still expected to have falling earnings in 2019 and 2020 but investors have been diving in. Shares are up 16% year-to-date. It’s still dirt cheap, however, with a forward P/E of 6.

3.       Legg Mason LM, the global asset management firm is also cheap even though shares are up 19% year-to-date. It has a PEG ratio of just 0.7. Investors also get rewarded with a dividend, currently yielding 4.8%.

4.       Mallinckrodt MNK, the specialty pharmaceutical company, is trading with a forward P/E o just 2.9. It has a P/S ratio of just 0.7. Is this a buying opportunity for a bigger company to get it on the cheap?

5.       United Natural Foods UNFI is a wholesale distributor of over 100,000 products. It’s dirt cheap, with a forward P/E of just 6.7 and a PEG of 0.9. Shares have fallen 69% over the last year but have rebounded 27% year-to-date.

One of the key lessons of the book is to always do your research.

What else should investors know about being a value investor?

Listen to this week’s podcast to find out.

[In full disclosure, the author of this article owns shares of GIII in her personal portfolio.]

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General Motors Company (GM) : Free Stock Analysis Report
 
Legg Mason, Inc. (LM) : Free Stock Analysis Report
 
United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
 
Mallinckrodt public limited company (MNK) : Free Stock Analysis Report
 
G-III Apparel Group, LTD. (GIII) : Free Stock Analysis Report
 
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