Bargain Stocks and How to Identify Them

When you're a value investor, you've got to be constantly looking for bargains. The question is: How can we determine whether a stock is a bargain?


As a true value investor, you need to know what a company's stock is really worth before you can determine whether it's a bargain stock. I'd like to pass along the methodology I use to find the true worth of a company. I find the estimated value of a company by doing a few calculations with the help of my trusty computer.

I download a large amount of data into my computer each month and then turn my computer loose to determine preferred buy and sell targets for my stocks. My database includes 10-year history for sales, cash flow, earnings, dividends, book value and price per share for about 1,000 companies.  

The initial objective is to organize the numeric history of each company, so that future stock prices can be predicted. Calculations can be a little tricky, because anomalies such as deficits, exceptionally good or bad years, or a multitude of other variations could throw the predictions out of whack. But I've programmed my computer to deal with anomalies, and the resulting stock price forecasts are quite accurate.

Each month, I publish my price predictions for 275 companies in the Cabot Benjamin Graham Value Investor. I recommend that investors buy at or below my Maximum Buy Price and sell when the stock reaches my Minimum Sell Price. It's that simple.

Each piece of the puzzle must be assigned a value before buying, or endorsing, it. Everybody wants to buy when a stock is undervalued and sell when the stock price is fully valued. But the trick is having a proven, time-tested system that helps you spot bargain stocks, and rip-offs. It's taken years to hone, but that's what my system is able to do!

Featured Stock Picks

Each write-up features commentary on the picks from one or more of our expert stock market analysts, as well as company details and a stock chart.

More about Value Stocks

Buy low, sell high: it's the oldest trick in the book for a reason. Value stocks can be the safest way to big profits, but how do you find them?


Headline News

Stock Picks

Shopify

Shopify (SHOP), which came public in May of last year, is a new leader.

Facebook

Roy Ward uses the PEG ratio to determine if the stock is undervalued or overvalued.

Amazon.com

For AMZN to be undervalued, the stock would need to fall to 393. 50.

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