Saturday, February 18, 2012

Thoughts on Investing P/E

Thoughts on Investing--New Rules of Money, courtesy of Forbes

#3 Low P/E doesn’t Equal Value

Many adherents to fundamental analysis and value stock investing seek stocks with below average price/earnings multiples and price-to-book values.

These ‘accounting-dependent’ fundamentals proved to be traps during the financial crisis when liquidity wreaked havoc on asset values and earnings.

Cheap stocks, including many financials-ranging from Fannie Mae to Washington Mutual-became a recipe for disaster and many still languish today.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.