This week’s AAII Weekly Digest highlights these “must-read” AAII articles:
Valuation ratios do not tell you what you are getting for your money, whereas intrinsic value allows you to assess the stock’s potential. Rupal Bhansali, manager of the Ariel International (AINTX) and the Ariel Global (AGLOX) funds, discusses her contrarian, value-oriented approach to investing with AAII Journal editor Chuck Rotblut.
For the fourth edition of his book “How to Make Money in Stocks: A Winning System in Good Times or Bad” (McGraw-Hill), William J. O’Neil, founder of Investor’s Business Daily, studied the characteristics common to 1,000 of the biggest stock market winners from 1880 through 2009. The rules of the CAN SLIM system are based upon the fundamental and technical factors of these winning stocks before they had their big price increases. This article discusses how you can go about creating a stock screen to identify stocks with those same characteristics.
Deep value investing has outperformed the market averages over long periods of time, so why wouldn’t everyone with a long time horizon embrace it? Because buying deep value companies requires being able to cope with some discomfort, as it requires an unusual willingness to stand alone, persevere and look foolish. Acceptance of discomfort can be rewarding, however, as equities that frequently cause their owners discomfort trade at exceptionally low valuations.
When investing based on a screen, have preset rules regarding diversification, choosing stocks, selling and tax management. Target a minimum amount of industry and sector diversification, and be willing to forgo some of a screen’s passing stocks to maintain it. When trying to break ties between stocks passing a screen, sort the results by a preferred metric such as relative strength or dividend yield. And an automatic plan for rebalancing can maintain discipline, but allowances must be made to manage the impact of taxes.
Our Member Question for this week is:
What do you believe is the biggest obstacle to global economic growth?
Vote to answer this week’s Special Question:
According to the Federal Reserve Bank of New York, total U.S. household debt climbed to $12.6 trillion at the end of 2016, nearing levels not seen since 2008. What do you think the implications of this are for the U.S. economy and stock market?
Last Week’s Results:
Where are you at in your annual income tax filing process?
In case you weren’t aware, you have until April 18 this year to file your federal income taxes without requiring an extension (you get an extra day if you live in Maine or Massachusetts). Our weekly survey question last week asked our readers where they are in the income tax filing process. In addition, our weekly special question asked our readers what their primary financial planning objectives and biggest concerns are.
As a member of AAII, you have access to over 60 stock screening strategies. These approaches are intended to educate our members as to what works (and what doesn’t) when selecting stocks, as well as offering monthly stock ideas. Last year, 43 of the 63 stock screening strategies tracked by AAII topped the S&P 500. However, the Downward Estimate Revisions screen, which looks for those companies whose consensus earnings estimate has seen the largest percentage decline over the last month, walked away with the top prize. This article touches on the key trends among the AAII stock screens as well as the best and worst performers of 2016.