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Hunting value, finding lots

My annual hunt for value plays using Joseph Piotroski’s F-Score has been particularly fruitful this year
Hunting value, finding lots
  • A strong 12 months with a 42 per cent total return vs 36 per cent from the market
  • A 147 per cent return since inception seven years ago vs 78 per cent from the market
  • Simply loads of new ideas for value fans

When accountancy professor Joseph Piotroski came up with his system to identify companies with improving prospects, he married it with a measure of value that was highly regarded among academics at the time: the price-to-book (P/BV) ratio.

The P/BV ratio is great in theory. The book value of a company should tell investors two important things. One is an indication of what value may be salvageable for shareholders in the doomsday scenario that a company goes out of business. The other more important thing the ratio should indicate is the size of the asset base from which a company seeks to generate profits. Often value stocks have seen profitability sag, so having an idea about the raw potential for profit in sunnier times can be extremely helpful.

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