The most common way to identify Trade Alert Scanner is by low ratios such as P/E (Price on Profit), P/B (Price on book value) or P/S (Price on sales) compared to other companies in the industry. The critical eye must always be present. Finding companies that meet these characteristics does not guarantee that their price will come close to the intrinsic value that we believe you have.
As investors, you must bear in mind that there could be a reason that really justifies the fall in the share price. To evaluate the situation correctly, we must ask ourselves: 1) What is the event that would push the stock back to the price that reflects its intrinsic value? 2) How long can it take to happen?
In this way we will be able to really evaluate if it is convenient to buy the stock or if we are embarking on an investment that will not have the returns we expect. Clearly the idea is not to wait forever for the price recovery of the chosen company.
Classic firms recognized for their value and long history are several of those that make up the portfolio of investor Warren Buffett. It is the big question that many investors ask themselves. There is talk of the “lost decade” of value investing. The traditional Trade Alert Scanner model indicates that value companies, which are usually cyclical, have their boom in the last phases of the economic cycle because in an expansion, earnings growth is plentiful, even for companies with weaker performance, which are preferred by value investors.
But some analysts, based on what happened in recent years, say that growth companies tend to have better returns in the boom stage, before some type of recession is triggered. In a bear market, growth companies may be the most affected in their valuation, as part of the explosion of a bubble. And that will depend on how solid your business model is.
What we have to take into account is that even though we choose to go with the strategy of growing companies, we must differentiate those that are simply “in fashion”, those that really generate lasting value over time. Those are the ones that even, although there is an economic crisis, they will come out faster.
Before you start, define your investor profile. If your stock market knowledge is rather limited, stick to some basic techniques. And simple tools like stocks or trackers on the major world indices. If you are more sophisticated, you can vary the strategies and handle sophisticated tools such as warrants.