How to Use Value Trader

First and foremost, investing in risky and there are no guaranteed ways to make money, if you are looking to make a quick buck you've come to the wrong place, since value investing takes time, to pick the stocks and to sell them.

Value-based investing normally involves holding on to stocks until someone else (savvy investors and/or corporate raiders) realises what a bargain they are, which can take anywhere from 3 months to 3 years. On average you probably want to hold around 10-15 stocks in your portfolio with a turnover of four or five per year.

You can come here and look at the stocks other people have entered, and while that may be interesting, its a risky strategy to buy these since they could have entered the wrong data. In reality you will need to go a bit further in order to get the most out of valueTrader.

Step 1: Register

You will need to sign up with an email address in order to create and manage your own valuations.


Step 2: Log in

Once you've signed up, you will receive an email with a password in it.

This password will give you access to additional functionality such as adding new companies and managing a list of valuations.


Step 3: Manage your profile

Click "Edit Details" on your user screen. You will be able to edit your password and default settings.


Step 3: Adding a new Company

To add a new company you will need to use the menu on the top-right.


Step 4: Fill in Company Data

This is the boring bit, fortunately though, entering information here doesnt take very long, at most you will spend about 1-2 minutes copy-pasting the information per company. The website does the hard work of crunching through the data and producing recommendations.

Some good sources to use for company data are the following:



Some guidelines:

  • FT.com generally has good data for UK and US companies. Morningstar is more limited, it has good data for the US markets but outside this it may not be very reliable.
  • Check the data as you enter it, look for obvious things: Assets minus Liabilities = Equity. If in doubt get a copy of the annual report of the company on that year

Bear in mind that "Earnings" here refers to the Operating Profit of the company, meaning the net profit before tax and additional adjustments for extraordinary items. This is a more reliable figure since it portrays the margin of the company, whereas taxes sometimes applies on a different year and extraordinary items can confuse the figure for running profits. Banks, however, do not have Operating Profit so just enter the Net Profit figure (before taxes) instead.

Once you've found the data for annual statements just copy-paste the values into the "Raw Data" section of the company.


Step 5: Review your Analysis

Then Press "Save" and Voila! A report is automatically generated. In this case the conclusion is that the stock is trading close to the intrinsic value. Don't worry though, there are lots of other good options out there.

Advanced: Using a Stock Screener

Ok so now you've got the process of entering data down-pat, the problem is that for every stock you enter the site is always saying SELL SELL, and you want to see BUY BUY.

Next step on the road to becoming a true value investor is HUNTING for good stocks out there with the help of a stock screener.

We will be hunting for stocks with the following criteria:

  1. Price lower than Book Value
    Price to Book Value lower than 1

  2. High Earnings
    PE Ratio lower than 10

  3. High Liquidity
    Acid Ratio higher than 1

  4. Solid Balance Sheet
    Current Ratio higher than 1.8

NOTE: There are almost always good alternatives out there, but they may not be the most popular, in fact you will generally find the best value deals when stocks fall out of favour or the economy is going through a rough patch. While there are no guarantees you will make money these are generally the best times to buy.


FT.com Stock Screener

http://markets.ft.com/screener/customScreen.asp

FT.com provides a very handy stock screener that everyone is free to use. Click on the page link above and try the following settings.

  1. Choose a Country (for example UK).
  2. Leave all sections chosen
  3. Add additional criteria as follows:


Financial Visualizations

http://finviz.com/screener.ashx

This is another site that also contains a stock screener, I found it looking for "stock screener" in google.

The principle is the same. Just enter the same criteria here as we did in the last screener:

More about Value Investing

This little book is worth its weight in gold 100 times over. I found it in a Borders bookshop when they still had that store in Oxford Street with the Starbucks in it.

You can get a copy on amazon if you like, the url is as follows:
http://www.amazon.com/Little-Value-Investing-Books-Profits/dp/0470055898

valuetrader.net

valueTrader.net is a tool that provides buy or sell conclusions based on analysis of stock fundamentals such as balance sheet and profit & loss figures.

Analyses and recommendations are based on financial data supplied by our users which may be entered incorrectly or is out of date, thus valuetrader.net does not warrant the accuracy, reliability or adequacy of the calculations or any other information displayed on the website.

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