A Detailed Description of Selection Criteria for My Stocks

A Detailed Description Of Selection Criteria For My Stocks

All stocks in the Dairy Products industry: [pic 1]

All stocks in the Meat Products industry:

[pic 2]

The first selection criteria: Undervalued Growth Stocks

The specific means of this selection criteria is we should find stocks with earnings growth rates better than 25% and relatively low PE and PEG ratios. (quoted from Yahoo) There are two ways to lead to a low PE ratios, the first one is the stock is undervalued and the other is the growth rate is too high. So we should be more careful when we use the PE ratio to screen the stocks .The growth stocks means a growth stock is a share in a company whose earnings are expected to grow at an above-average rate relative to the market. The reason that we find this kind of stocks to invest in is because the stock will have more growth potential in few years, and if we use the “undervalued growth stocks” as a selection criteria, it has more possible to get much more money in the future. Use this criteria we can choose the stock.

The second selection criteria: Beta

The beta (β or beta coefficient) indicates whether the investment is more or less volatile than the market. In general, a beta less than 1 indicates that the investment is less volatile than the market, while a beta more than 1 indicates that the investment is more volatile than the market.Beta is a measure of the risk arising from exposure to general market movements as opposed to idiosyncratic factors. The market portfolio of all investable assets has a beta of exactly 1. A beta below 1 can indicate either an investment with lower volatility than the market, or a volatile investment whose price movements are not highly correlated with the market.

The third selection criteria: Price-to-book-value ratio below that of peer group

The price-to-book ratio (P/B Ratio) is a ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share. A lower P/B ratio could mean that the stock is undervalued. However, it could also mean that something is fundamentally wrong with the company. As with most ratios, be aware that this varies by industry.

The fourth selection criteria: Profit margin

Profit margin is calculated with selling price (or revenue) taken as base times 100. It is the percentage of selling price that is turned into profit, whereas "profit percentage" or "markup" is the percentage of cost price that one gets as profit on top of cost price. While selling something one should know what percentage of profit one will get on a particular investment, so companies calculate profit percentage to find the ratio of profit to cost.

The profit margin is used mostly for internal comparison. It is difficult to accurately compare the net profit ratio for different entities. Individual businesses' operating and financing arrangements vary so much that different entities are bound to have different levels of expenditure, so that comparison of one with another can have little meaning. A low profit margin indicates a low margin of safety: higher risk that a decline in sales will erase profits and result in a net loss, or a negative margin.