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Old 28-08-2011, 07:59 PM
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Default Piotroski’s Efficient Value Investing

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The author differentiates high book-to-market companies using signals based on nine financial parameters:

ROA – net income before extraordinary items scaled by beginning of the year total assets
CFO – cash flow from operations scaled by beginning of the year total assets
Change in ROA – current year’s ROA less the prior year’s ROA
Accrual – ROA-CFO
Change in leverage – historical change in the ratio of total long-term debt to average total assets
Change in liquidity – historical change in the firm’s current ratio (ratio of current assets to current liabilities at fiscal year-end) between the current and prior year
Equity offering – whether the firm issued common equity in the preceding year
Change in margin – current gross margin ratio (gross margin scaled by total sales) less the prior year’s gross margin ratio
Change in turns – current year asset turnover ratio (total sales scaled by beginning of the year total assets) less the prior year’s asset turnover ratio

Each of the nine signals yields either a good (1) or bad (0) indication. The total score for a company in a given year therefore ranges from 0 to 9. About 10% of the 14,000+ company observations earned a total score of 8 or 9; about 3% earned a score of 0 or 1.

The Paper
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Old 29-08-2011, 01:02 PM
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thanks!
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Old 29-08-2011, 01:39 PM
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Could be useful for good companies undergoing current (often temporary) distress when they are available cheap (close to or lower than Book Value). (Coupled with Technical cues like higher lows, better momentum etc.)
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Old 27-07-2013, 03:31 PM
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Have chosen this one for the reversal/turnaround candidates Most comprehensive.

Better ratios can be used Like the authors use of Total Assets can be substituted with IC (invested capital) This will weed out idle assets like land & inventory pile-up (And once these become productive - like if the land is put to use or sold- it'll show up in IC as either as an increment of it's fixed or liquid component). Likewise for leverage check a combo of D/EBIT & Int Covr can be better The 1st one has an operational component So even if the company has not pared debt there could be an effective reduction in leverage due to operational improvement The 2nd one is a fortification (not entirely redundant though as int costs may change due to external macro-economic factors) For liquidity will add a more stringent metric in the form of the OCF Ratio Also prefer the Quick Ratio (as it excludes inventory) to the Current Ratio used, but the latter more universal (applicable to both manufacturing & services). The Turn factor will definitely incld a WC cycle check OPM is the preferred choice above the gross margin used. No big need for explicit check on Equity Offering imo Will instead use the the triumvirate of the deltas of EPS, OCFS & ROE for catching significant equity dilution (Apart from being useful info on their own). (What DOES need to be checked in the Indian context though is the percentage of promoter shares pledged & it's delta).

While extreme distress is not the outlook may nonetheless include 2 high wtg components of the Altman Z-Score (specially the retained earnings component Stressed companies are unlikely to pay dividend right away So this would be more relevant than a div payout check)

While this was devised for value, can also be used for growth/momentum plays (if you leave out valuation or use val metrics that factor in growth). Much more comprehensive than say CANSLIM. The 'stress test' part can also be excluded (since you're focussed on high growth anyways) but no harm in checking if the company isn't going overboard & leveraging too much or if the cash flow is as good as the profit figs. Margins are an impt metric anyway (If high profitability comes with high/improving margins that calls for a premium).

Price will still be ahead (Wave1 most likely forfeited) The lead factor for FA will have to come from macros (specially sectoral macros).
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Old 28-07-2013, 09:44 AM
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Bro ! the paper removed. cud u pls upload it 4 shared or elsewhere ?

Quote:
404 - File or directory not found.
The resource you are looking for might have been removed, had its name changed, or is temporarily unavailable.

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Old 14-08-2013, 08:41 PM
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http://www.chicagobooth.edu/~/media/...B1974FD74D.pdf
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Old 16-08-2013, 08:33 PM
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Finalized Piotroski+ with a max score of 18 (6 pts for each categories with params weighted by importance & double wt to those that can be based on more recent data).

Wockhardt is still very good with a score of 15 (will likely come down a bit over the next 3 qtrs).

Amongst the 2 beaten down low price to book (or high book to market, as per the paper) non-ferous ones STERLITE is quite decent at 11 while HINDALCO doesn't seem to make the cut at 4 So it's more of a bet purely on asset value (Sterlite turns out to be a little cheaper too- of the two- at CMP).

Financials need some adjustment on the params, but on the whole ICICI is quite decent at 12 REC at 11 is quite a bit cheaper HDFC at 10 more expensive (but probably safer)
RELCAPITAL (at 10 apparently but need to a take a closer look) is improving but ROEs still very low (That coupled with high beta makes it a good trading bet- both ways ).
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Old 22-10-2013, 03:23 PM
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Works better with the lowest quartile of P/B (or EV to IC) as universe (Increasing P+* is best imo but for that one needs to track P+ values yr-o-yr or, better, q-o-q).

*the present high ones maybe in a declining trend & vice-versa
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Old 22-10-2013, 09:22 PM
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What it says for Atul Auto?
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Old 23-10-2013, 02:16 PM
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That's in the upper quartile of P/B & not suitable for this (rather in the growth/momentum category) The one with a (likely improving) P+ score of 10 is TVS (But Autos didn't quite reach the lower quartile of sectors).
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