Jolly_Rancher

Mark Fisher: Analysis Doesn't Matter in This Market

Value analysis works well in this market. Value investors value stocks based mostly on one of two criteria: 1) NPV of furture cash flows plus salvage value; OR 2) Liquidation asset value. The problem with using NPV is that cash flow estimates are plummeting fast. High government and consumer debt levels and low income/job prospects make future cash flows predictions somewhat somber. That leaves liquidation of assets as the more likely method today, and looks like what the market is increasingly understanding. It's taking companies' share prices down to liquidation value. The problem with this is that all of the assets can't be liquidated at once. So I expect at some point in the next few months, should this economy not improve, to have NO BIDS and so no trade on many stocks. Value analysis works well, but when asset prices are falling so dramatically, you need to be on top of the game. Using the NPV Excel function with recent cash flows from company quarterly reports will burn you.

Coverage Ratios: What We Can Uncover in the S&P

Excellent article. This is the way to uncover bargains!