November's Low Price To Book Stocks Vs. Bankruptcy Risks

Fri, 11/04/2011 - 08:31 EDT - Seeking Alpha

By Value Research:Academic studies have shown in multiple time frames, in multiple markets, that there is a value effect. Stocks that sell at the deepest discounts to accounting values of their equity have enjoyed higher returns than stocks that sell at the highest premiums to their equity values. On the basis of overwhelming empirical evidence, the price-to-book ratio is a useful starting point for value investing. However, these stocks suffer incredible risks. Many of these stocks are on the verge of bankruptcy, have lagged financial statements which do not accurately portray current equity values, or cannot be rationally valued on the basis of reported financial statements. Since the price-to-book ratio has been connected to long-term returns, is there a long-term measure of risk we can use? Fortunately, there are methods that can help distinguish value investments from value traps. One predictive measure of bankruptcy for non-financial companies is the Altman Z-Score. ThisComplete Story »

Original article
Login or register to post comments

Low Price To Book Stocks: 50 'Risky' Candidates To Consider
By Value Research:Academic studies have shown in multiple time frames, in multiple markets, that there is a value effect. Stocks that sell at the deepest discounts to accounting values of their equity, have enjoyed higher returns than stocks that sell at the highest premiums to their equity values. On the basis of overwhelming empirical evidence, the price to book ratio is a useful starting point for value investing.
Evaluating Long Candidates With Price-To-Book Ratios And Altman's Z-Score
By Value Research:Stocks that sell at the deepest discounts below accounting values of their equity (the lowest price-to-book ratios) have enjoyed higher returns than stocks that sell at the highest price-to-book ratios. On the basis of overwhelming empirical evidence, the price-to-book ratio is a useful starting point for long-term value investing.
Long Call Candidates: P/B Ratio And Altman Z-Score
By Value Research:Value investors may be dissuaded by the 2012 stock market rally and the Federal Reserve's open-ended quantitative easing announcement. They might worry that the upside of investing in the stock market is outweighed by the downside as price multiple expansion has ruined many buying opportunities.
2012's Top Dividend Stocks To Beat Treasuries
By Dividend Dog: In today's low-interest-rate environment, investment-grade corporate bonds and government bonds offer very low yields. Investors seeking additional income in today's markets are tempted to purchase high yield debt and dividend-yielding stocks. Fixed income investors should realize that there is nothing for free, and that there are risks associated with higher returns. Investors should attempt to understand and weigh the risks of their holdings.
2012's Top Dividend Stocks To Beat Treasuries
By Dividend Dog: In today’s low interest rate environment, investment-grade corporate bonds and government bonds offer very low yields. Investors seeking additional income in today’s markets are tempted to purchase high-yield debt and dividend-yielding stocks. Fixed income investors should realize that there is nothing for free, and that there are risks associated with higher returns. Investors should attempt to understand and weigh the risks of their holdings.
45 Dividend Stocks with Good Credit Scores
By Value Research:In today’s low interest rate environment, investment-grade corporate bonds and government bonds offer very low yields. Investors seeking additional income in today’s markets are tempted to purchase high yield debt and dividend-yielding stocks. Fixed income investors should realize that there is nothing for free, and that there are risks associated with higher returns. Investors should attempt to understand and weigh the risks of their holdings.
3 Attractive, Low P/E Ratio Stocks And More With Safe Credit Scores
By Value Research: Three Attractive, Low P/E Ratio Stocks Many value investors use the price-to-earnings ratio as a measure of cheapness and buy stocks with low P/E ratios to maximize earnings yield. This strategy seems obvious, but there is a catch: many cheap, low P/E stocks bear incredible risks. Some are on the verge of bankruptcy.
Estimating The Risk Of Arch Coal Using The Altman Z-Score
By Paulo Santos:Given the ongoing panic in coal shares, I decided to do a series which will look at several coal stocks using the Altman Z-score. The purpose will be to get a feel of the relative risk with each coal stock. I will start with Arch Coal (ACI). The Altman Z-score, as defined by Wikipedia, is:
Estimating The Risk Of Peabody Energy Using The Altman Z-Score
By Paulo Santos:Given the ongoing panic in coal shares, I decided to do a series which will look at several coal stocks using the Altman Z-score. The purpose will be to get a feel for the relative risk of each coal stock. This article will be on Peabody Energy (BTU). The Altman Z-score, as defined by Wikipedia, is:
How to avoid investing in distressed stocks: an Altman Z-Score case study
Business distress and bankruptcy can spell disappointment or even disaster for investors – and at a time of economic uncertainty, making that critical call between risk and reward is an increasingly challenging prospect. In the current environment investors ought to be scrutinising the financial health of their portfolio stocks and applying extra due diligence when it comes to new investments – but how?

Main menu

Secondary menu

November's Low Price To Book Stocks Vs. Bankruptcy Risks

Related

Latest

User login

Our Blog

Markets Map

Follow Us

Secondary menu