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The stock market is efficiently priced, writes Howard, leaving value investors with the challenge of finding its mistakes. Small size, low PE, and neglected firms are three initial screens for value investing. The second stage of screening Howard recommends is growth and profitability, the characteristics typically found in higher PE stocks selling at a premium.
While this may not make you rich, Dr. Howard anticipates you may improve your portfolio performance by two to three percent using value investing techniques. This is based on academic research of the risk and success profiles of the different components of value investing. On balance, this is a conservative point of view that many investors will appreciate and learn from.
Michael Pellecchia writes about business and finance books each month He can be reached at michael_pellecchia@bookpage.com.
©1996, ProMotion, inc.
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