Bloomberg notes Portfolio management
• Different stock
o Value Stock
▪ High dividend yield, low p/e ratio
▪ Often neglected stocks that maverick investors go in to
▪ Reached the end of the business cycle (not growin
...
Bloomberg notes Portfolio management
• Different stock
o Value Stock
▪ High dividend yield, low p/e ratio
▪ Often neglected stocks that maverick investors go in to
▪ Reached the end of the business cycle (not growing)
o Growth Stock
▪ High p/e ratio, low dividend yield
▪ Could grow but don’t have the earnings history to back this up
▪ Bigger risk that value stocks
▪ High chance of growth means investors will pay more for them
o Garp stocks
▪ Target stocks in the middle ground between growth and value
• Price earnings ratio
o Price/eps
o How much are investors willing to pay for a dollar of earnings above the stock
o If eps is 2.8, and price is 374.23, then the p/e ratio is 133.7
▪ Meaning investors are willing to pay 374.23 dollars for every 2.8 dollars of that companies earnings
• 133.7 times earnings to price willing to pay
o 16 is a low p/e but not to low (value)
▪ Not growing anymore, but paying regular dividends
o Over 100 is high (growth)
• Dividend yield
o The measure of returns from a company paying dividends to its
investors
o Annuals dividends per share/price per share
▪ It’s a percent so times by 100
o Don’t need to pay dividends (skipping them does not affect credit
score), but regular payments are a sign of stability
• Could also look at price to book ratio instead of p/e raito
• p/b ratio
o price/book value per share
o book value=(liabilities-assets on balance sheet)/shares outstanding
o a measure of how much your willing to pay for a dollar of book value for that shareholders equity per share
o a p/b ratio of 0.9 represents a very distressed company
o p/b of less than 1 (or p/e of less than 5) is aggressive
▪ value investors go for these while everyone else is running away
▪ for a value investor, a price to book ration below 1.5 is good, while below one is distressed
• Could look to invest in a company with the following parameters (value strategy)
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