The Palm Beach Post from West Palm Beach, Florida on September 13, 1999 · Page 71
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September 13, 1999

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The Palm Beach Post from West Palm Beach, Florida · Page 71

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West Palm Beach, Florida
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Monday, September 13, 1999
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Page 71
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18 THE PALM BEACH POST SEPTEMBER 13, 1999 It can be tricky to find true worth of Value' stocks , True masters of value investing also look at other indicators, including a company's cash flow, its dividend yield and its tax situation. When a high percentage of a company's share price say 10 percent or more is represented by available cash, the company has a lot of leeway to spend money on improvements. It also might become a takeover target. Companies that offer dividends tend to be value stocks, especially when their dividend tops 3 percent, or is higher than the dividend yield of its competitors. Finally, look for companies that already face a realistic tax burden: Companies that show great earnings, but pay little in taxes, always are vulnerable to Uncle Sam playing catch up. Linda Stern is a free-lance writer who covers personal finance issues for Reuters. the company underlying the shares is worthless. The term "value" implies a good price for a valuable item. The best value stocks are those that have solid growth records, but are overlooked or underpriced by the market for reasons that don't signal the company's prospects. For example, their entire sector is out of favor; they had a one-time problem that's been corrected; or they are emerging from a rocky period and investors haven't noticed it yet. There are numerical targets that can help you spot a value stock. The most commonly used is price to earnings ratio, or PE. Many value investors like to keep their PEs under 20, which means that the price is 20 times earnings. If the company's earnings never changed from year to year, it would take you 20 years to "earn" the buying price back in the companies earnings. In recent months, Internet stocks have been selling at PEs of 700 and more, or even for those companies that have no earnings at incalculable PEs. If the market suddenly turns and starts being more conservative in its valuations, those stocks would have far further to fall than a stock with a PE of 11 or 12. It's a good idea to look at a company's relative PE: It should be lower than its own average and lower than the market as a whole if it is a true value situation. Price to book value is another indicator of value. The book value of a company is its worth if you broke it up and sold all of its pieces: Every desk and computer, and all of its contracts. A company with a price to book value ratio of under one is a screaming value: Theoretically, you could buy it, sell its pieces, and prosper. dex for the first time since its 1994 inception. The stock market moves in many cycles, and one of them is the growth-value cycle. Growth stocks will outperform value for a while, and then value will outperform growth for a while. Nobody knows whether we are on the brink of a long while or a short one, but there are a couple of points to consider. If almost all of your investing has been on the growth side say loading up on drug, tech and Internet stocks it couldn't hurt to balance that with some value investing. Secondly, value stocks have a much better record of weathering rising interest rates and crashing markets. If you expect anything like that in the near future, you might want to pick up some values. That doesn't just mean cheap. The lowest priced penny stock on the street might be expensive if ? Linda Stern Reuters WASHINGTON At least two major mutual fund companies have made it a point in the past few weeks to turn their shareholders' attention to value investing. "Explore the value in value investing," exhorts the Vanguard Group, while T. Rowe Price has sent a special letter to shareholders, noting "Increasing your value-focused holdings will help you further enhance your portfolio's long-term prospects while reducing its overall risk." They may have a point. Value stocks, also known as "bargain" stocks, were shunned and un-derperformed the rest of market for most of the past three years. Starting in April, investors turned away from the "growth at any price" mania that had gripped them and began buying stocks Ind funds that focused on value. Now, T. Rowe Price is reporting that for the first half of this year, its Value Fund beat the Standard & Poor's 500-stock in- ism) I ' WW3 YiYTYrrrrrrPTTri FOLDING SHUTTER CORPORATION If) Business Banking Charles Feasel is a talented individual. He is a man with 30 years of experience in local business banking in Palm Beach County. Experience of that nature is rare. Charles Feasel is now a member of Fidelity Federal's business banking team. That's right - Fidelity Federal, the same place many of you opened your very own school savings account in the 50's and 60's and then possibly got a home loan later in life. Fidelity Federal is proud to have Charles Feasel and others like him to now help you with your business banking. Local Bank vs. Mega-Bank With nearly 50 years of local banking, Fidelity Federal is continuing to add highly qualified experts who have the knowledge of this business community's financial needs. Charles Feasel can help you with a Line of Credit structured to fit your specific financing needs. His experience can be an asset to your business. Fidelity Federal has a team of experts, like Charles Feasel to assist you. If you are interested in working with a local bank rather than a mega-bank call Fidelity Federal's business banking team. Take advantage of local expertise you can count on. Charles Feasel, Vice President & Senior Commercial Development Officer, Formally Executive Vice President, The Bank of Palm Beach "We can structure a financing program to fit your business www.5COlTTr8ElB.com Supported By Over 90 Offices Nationwide. 561-655-1906 421 S. Olive Ave. 1-800-619-SAVE (2 Hours) ScoTTrade is the online trading site of Scottsdaie Securities. Inc. Limit orders are an additional $5. $2,000 Minimum equity. FDIC Insured 1(1 UAL HLHIiWO LINDIR FIDELITY FEDERAL 203-9900 www.fidfed.com

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