4 Key Elements of Value Investing

Andrew Gordon, Senior Market Analyst of Investor's Daily Edge, advises investors how to harness the power of value investing.

Delray Beach, FL (PRWEB) May 4, 2007 -- "The market punishes slow pokes and sheep, and that's why the last thing investors should do is invest like the pros. The difference between going with or against the pros is the difference between trailing in their path and picking up the crumbs, or forging your own trail and picking off the ripe fruit that nobody else has gotten to. If you want to make good money, you need to invest 'unprofessionally,'" according to Andrew Gordon, senior market analyst of Investor's Daily Edge.

If investors want to escape this vicious cycle, they could deliberately choose fundamentally sound companies that most investors dismiss because their profitability has either slowed or not kept up with faster-growing companies. But because investors are ignoring these companies, their shares come cheap … sometimes dirt cheap.

Gordon adds, "This contrarian play is so popular that there's a word for it - value investing … Value investing has a long and respected pedigree stemming from the publication in 1949 of The Intelligent Investor by Benjamin Graham, the father of value investing. Dozens of studies have shown that value investing really works. It's a great way - but not the only way - to escape from doing what the herd is doing."

Here are the top four metrics to consider when value investing:

1. A recent fall in share price of at least 15 percent together with strong analyst recommendations. Shares of these companies usually bounce back strongly.

2. A PEG (price/earnings to growth) of less than 0.8 and weak analyst recommendations. Investors can get this combination in weak or cyclical sectors or sectors on the verge of rebounding. Why 0.8? Most investors use 1.0 as their cutoff and it helps keep a distance from the crowd.

3. Strong cash flow growth and low institutional ownership. A company that can grow its cash faster than its competitors gets attention. The institutional investors catch on to these companies eventually, and when they do the shares go up in a hurry.

4. Insider buying and weak stock growth. Top-level executives who put up their own money are privy to all kinds of sensitive information that never sees the light of day. If they're buying, it's usually for a good reason. Insider buying gives you advanced notice of better days, and weak capital appreciation has kept the share prices low. Nice combination.

"Search engines on the major financial web sites allow you to search for companies using these metrics. Remember, it's the first step - not the last - in evaluating a company," states Gordon. Adding, "But these pairings can point to companies that have escaped the adulation of the investing crowd. And that, my friend, makes you a contrarian with the chops to find ripe low-hanging fruit on your own."

For more information and to read the full article, visit Investor's Daily Edge at http://www.investorsdailyedge.com/archive/index.php

About Andrew Gordon and Investor's Daily Edge (www.investorsdailyedge.com)

Mr. Gordon has a Master's Degree from the London School of Economics and over 25-years of experience. He's also authored six books on the global markets, including China's Oil and Gas Industry, and The World Coal Market. Mr. Gordon specializes in identifying deep value companies with a solid margin of safety as well as income investments with a strong potential for capital gains. He has also become a leading expert in utilizing Exchange Traded Funds (ETFs) to profit from rising and falling market sectors. Mr. Gordon is currently the Editor-in-Chief of two monthly investment research services - INCOME and The Wealth Advantage.

Investor's Daily Edge (www.investorsdailyedge.com) is a free investment newsletter that's delivered by email before the market opens. In each weekday issue you'll receive clear recommendations and practical strategies for protecting your portfolio and multiplying your money - whether the market is rising or falling.

For more information about our editors, or to set up an interview, please contact Wendy Montes de Oca at 561-921-0001 or visit www.investorsdailyedge.com.

# # #