Margin-of-safety list March 2019

Companies selling at a discount was last reported by this blog back in March 2017. On that occasion we provided the figures from the FTSE 350 only.

Nick has recently rerun the programme to see where we are in respect of contenders. Twenty four companies from the S&P 500 and FTSE 350 combined qualified.

Therefore, 24 companies made the ‘value’ list from a total of 850. From our list in 2012 the share price increase has been dramatic but not particularly surprising as it was over a significantly bullish period.

What we are more pleased about is that only one company from that 2012 list came out with a lower share price today.

These are the prices in 2012 of the companies on Nick’s spreadsheet compared to their current value.

Altisource Portfolio Solutions – 5,000 to 15,000
Cognizant Technology Solutions Corp – 3,400 to 8,000
Google Inc – 31,100 to 120,000
EZCorp Inc – 3,000 to 1,000
Ebix Inc – 2,000 to 8,000
World Acceptance Corp – 7,000 to 13,000
Apple Computer Inc – 4,000 to 17,000
Oracle Corp – 2,500 to 5,000
Monster Beverage Corp – 1,000 to 6,000 Inc – 48,000 to 200,000
Western Digital Corp – 3,000 to 10,000
Balchem Corp – 4,000 to 10,000
Middleby Corp – 3,000 to 12,000

Nick’s list is a consequence of a detailed financial analysis of a companies figures inline with our ‘value’ criteria in providing investors with a financial ‘margin of safety’. What it does not provide is such things as the remuneration of management and whether a company has what Buffet refers to as a ‘moat’.

Finding discounted companies is an investment approach, whereas our day trading is a speculative angle. We keep both separate. They are of two extremes not only in attitude, as one is from purely fundamental information and the other technical, but also in a meaningful timeline context; one is in and out within a few hours, the other many years (or even a decade or two) would not be unusual.

Previous posts on value investing provide additional detail; however, the concept follows the teaching of Benjamin Graham. The general idea of which, best given in Graham’s (updated by Jason Zweig) book ‘The Intelligent Investor‘.

The Intelligent Investor by Benjamin Graham updated by Jason Zweig.

Below is a list of stocks and shares (March 2019) that satisfy our ‘value investment’ criteria of so-called buying a dollar bill for not more than 60 cents. In other words, we ‘look for values with a significant margin of safety relative to price’.

Nick’s value stocks and shares March 2019.

Note on P/E. Graham rates growth potential far more than quality of earnings when determining P/E ratio. He (Graham) looked at the long term potential of a company rather than the recent price. That’s why we only flag P/E in the spreadsheet rather than use it as an automatic filter. However, “a P/E ratio much above 25 made Graham grimace”. We feel that in today’s market a P/E of over 40 warrants consideration as to its suitability as an investment vehicle. Of particular attention in this regard, therefore, are Amazon P/E 83 and Netflix P/E 132.

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