ADVFNGuide:ABeginner’sGuidetoValue

Investing

ClemChambers

PublishedbyADVFN

978-1-908756-02-2

Copyright©ClemChambers2012

http://www.advfn.com

CHAPTERSInvesting: How To GetStarted

WhyValueInvesting?

SearchingforCompanies

Criteria

No-Nos!

ValueInvesting:HowToDoItInPractice

AFewOtherIssues

Conclusion

AlsobyClemChambers:101Ways to Pick Stock MarketWinners

AbouttheAuthor

Investing:How To GetStartedMost people think thatinvestinginstocksandsharesis a risky game only playedbyrichpeopleandgamblers.

Fromtheoutsideitseemsit’s hard to know how to

make money investing instocks. There are so manystoriesaboutpeoplewholosetheirshirts.

This is true and falsedepending on what you setouttodo.

Investing is not hard buttrading shares is nigh onimpossible.

Most people confuse thetwo things: trading is notinvestingandviceversa.

Trading is very close to

gamblingand,likebettingonhorses, it is extremelydifficulttomakeaprofitfromthatkindofactivity.

Investing, on the otherhand, is quite boring and themoreboringyoucanmakeit,thebetter.

Investing is not hard.Making money by investingis not that difficult, but ittakeseffort.

There are many tradingschemes, none of which I’m

aware are much good atmakingmoney.

There are quite a fewinvesting strategies andmostwill make you money. Thesimplest and the most triedandtestedisvalueinvesting.

Value investing as amethod was laid out clearlyfor the first time by anAmerican professor calledBenjamin Graham in the1950sandoneofhisstudents,WarrenBuffett,useditasthe

basis for his career in whichhe has become the richestmanintheworld.

Value investing is at itsheart simple: buy cheapstocks then sell them whentheyarenotcheapanymore.

While value investingwon’t make you the richestperson on the planet, it is aplatform forgood investmentprofits. The basics can bepotted down into a set ofsimple straightforward

methods.I have followed the

principles of value investingfor many years and it hasalways given me excellentprofits.

Apart from excellentprofits, one key benefit ofvalue investing is that itdoesn’t stress the investorout. Done properly it is acomfortablewaytotakeriskswithyourcash.

Moststockmarkettrading

and investing ideas arepacked with stress and evenwhenthesesystemsaredoingwell, anyone following suchideas can be put through theemotional wringer. Thisemotionalprice issimplynotworth paying for mostpeople;itburnsthemoutanddulls their desire to beinvolved.

The low stress level of asensible investing strategy isa sign that the investment

style you are following is asolid one. Investing shouldnot feel like war, it shouldjust be a normal workingendeavourthattakesacertainamount of time and effort. Itshouldn’t be a battle thatkeepsyouawakeatnight.

Value investing is andshouldbequiteaneasy-goingwaytomakemoneyfromthestockmarket.

Being dull doesn’t makevalue investing popular like

trading,butitdoesmeanthatthose that follow this ideamakemoneyyearinandyearout while traders come andgo.

Why ValueInvesting?If you wish to double yourmoneyveryquicklyinstocksand shares, you should stopreading this book right now.This book is about gettingrichslowly,notquickly.

Over twenty years valueinvesting will build wealth,

butyouwillnotberichfromitinacoupleofyears.

A lotofpeople that tradethemarketswant togethugeprofits, 100% or more in ayear. This is basicallyimpossible even if it mightseem on the face of itachievable.

Youhaveasmuchchanceof doubling your moneyevery year for three years ashittingajackpotatVegas.

To thenearestpercentage

there isnochanceofearninggains like 100% a year fromshares and if someone does,they have been very luckyand are not responsible fortheir good luck. Anyonereadingthiswhohasachievedsuch gains should close theirpositions now, pile theirmoney up on a table andcount it out before putting itback into the market. It willbeagoodopportunitytokisstheir money goodbye. Luck

or ‘one way’ markets thatprovide such profits do notlast.

Value investing is atechnique that whencombined with the simplebasicsofinvestmentprovidesa basis for building upwealth,withalotlessanxietythan the other investmentstrategiesoutthere.

Its sixty year history isalone a strongrecommendation that value

investingworksandwillkeeponworking.

Other ideas have comeandgone,yetvalue investingkeepsongoing.

Oneofthereasonsforthislongevity is that valueinvesting requires disciplineand some work. It is ratherboringandunflashy.

This is a benefit but formanyitisadrawback.Peopleare drawn to risky games—and the stock market is

considered risky— and theylike excitement and kudos.These‘punters’wanttomakequick money because theyhaveagamblingstreak.

Value investing does notsatisfy the gambling urgeverymuchasit isquitedrab,rather unexciting and takesregular maintenance.Gamblerswantminimalworkandplentyofsensation.

Value investing is likegardening, just the sort of

thing that gamblers aren’tinterestedin.

Consequentially valueinvesting is never in fashion.However, because it makesmoney, it is never out offashioneither.

Mostinvestorsknowtheyshouldbevalueorientatedbutfew can resist the enticingwhirligig of trading and theglamourofgo-goshares.

Thisisunderstandable.Peoplesimplycan’t resist

thelureofthecasinoeither.Why else would people

pour their money away onsimple games like roulette,when they have worked sovery hard earning themoneyin the first place? It isbecause people love noise,thrills and flashing lights.Theygethypnotisedbythem.Many shares in the stockmarketare likecasinogamesand the city has learnt longago that most of their

potential customers don’twant sensible profits; theywant the lure of riches and agamblinghigh.

Sadly greedy gamblingkillsinthestockmarket—orat least costs the player abundle.

Meanwhile, diligencepays.

This is why valueinvesting works. The markethas to pay investors a goodreturn to own boring out-of-

fashion shares. Prices ofunloved companies fall untilthey are so cheap that smartinvestors can’t resist buyingthem. At some point thisunpopularity goes intoreverseandthosethatboughtincheaplymakegoodreturns.

If I turn that idea aroundyou will quickly see why somanyinvestorslosemoney.

The reverse situation isthat people buy fashionablestocks that everyone loves.

Clearly at some point theprice of the share rises sohigh that people can’t resisttaking their profits. At thispoint everyone who can buyhas already bought andthereforethesharepricemustfall. When the company’sshare price falls it suddenlybecomes less popular asholders start to lose money.Lossesaremadebyeveryone.As the price falls so thecompany gets more

unpopularuntilnoonewantsto own it. After severalrounds of this the sharebecomesignoredandcheap.

Enterthevalueinvestor.The fundamental

principleofvalueinvestingisthe simplest: buy low, sellhigh. I like to say buy cheapandsell‘notcheap.’

The rest of this book isabout how to do just that.Valueinvestingisnotagreatdeal of fun, it is not very

exciting,butitwillmakeyoumoney. You can spend theprofits later on fun excitingthings.

(NB. Actually I thinkvalue investing is great fun,but I am probably weird.Hunting out value is anamusing challenge. You feellike a bit of a SherlockHolmes weighing all theevidence and once you areconfident in your skills it’samusing to note people

unable to grasp simple factsthatmake theprofitpotentialof a stock significant.However,IknowastheCEOof ADVFN, one of thebiggest share informationwebsites in the world, that Iam in a very smallminority.Itislikebeingabirdwatcherrather than a footballspectator. Market theorysuggests this is yet anotherreasonwhy value investmentissoprofitable.Fewapplyits

rules.)

Searching forCompaniesThekey tovalue investing isfinding companies that arecheap. That means lookingfor them. this might seemobvious but most people donot look for stocks, theylistentotips.

Itisamistaketotaketips.

Taking tips is the same asthrowing your money downthedrain.

Simply,never takenoticeoftips.Atworst,usetipsasastarting place for yourresearch. If you will do thatyouwill find that tipsdonotfit your criteria ninety-ninetimesoutofahundred.

It gets worse: if a tipmakesyoumoney—andfewwill — you won’t haveearneditandwillhavelearnt

nothing; it will be thefinancial equivalent of asnack on junk food. If youlose yourmoney— and youvery likely will — you willmostlikelyloseafriend.

Just say no to tips andstart looking for sharesyourself.

Stockpicking isallaboutdeveloping the skill ofsearchingfor,identifyingandmonitoringstocks.

A few years back this

wouldbe a long, tedious andfrustrating job. Goodinformation on shares wasreally hard to find andwhenyou found such data, it wasexpensive and after youbought it, it was verylaborioustosievethrough.

Thanks heaven for theinternetandmoreparticularlyADVFN.

IrunADVFNandIuseitforallmy investing.AssuchI’m not going to list all the

many other places to go andfind share information.ADVFNdoesthejobforme.

Sites like ADVFN giveyou share informationresources that in the 1990swould have cost you manythousands of pounds a yearand in some cases tools thatweresimplynotavailable.

This screenshot is forADVFN’s FilterX, which isan ultra-powerful tool toselect, grade, sieve and

separate shares on the stockmarket out of a universe ofmore than 2,000 in Londonalone.

There is one for US and

Canadian shares too. If youknowwhat kind of companyyou are looking for, FilterXcan drag those shares out ofthe pack in a matter ofminutes rather than throughhours of manual paperworkwork.

Itarealboon.The internet is the best

thing to happen for theprivate investor, period, andthefunnythingis,mostsharetraders couldn’t care less

aboutthefactsandfiguresonthe shares they follow, theywant tips. They want to getrichquick.

Sadly instead they getpoorfast.

On the other hand,professional investors usetools like FilterX, so theselect group of conscientiousprivate investors are in asmall segment of the overallmarket when they use theirownresearchtoselectstocks,

and this puts them at anadvantage over speculatorswho chase tomorrow’s bigriserorpeoplethatfollowtheresearchortipsofothers.

Anotherkeyadvantage tovalue investing is that manycompanies youwill find thatmeet therightcriteriaare toosmall for institutionalinvestorstochase,soyouanda fewother investorsmaybetheonlyonesfollowingthesestocks. By finding such a

stockyouaregettinginattheground floor of an upwardsmove,anadvantagethataddstoyourupside.

Of course, to select astockyouhave tohavesomecriteria.Beginnersdon’thaveany and in fact might notunderstand what all themumbo-jumbo in acompany’s financialinformationmeans.

Don’t worry, you wouldbetrulyhorrifiedifyouknew

how fewhave any cluewhatmany of a company’sbusiness metrics actuallymean.Thisishardtobelieve,butpretty soonyouwillnotethat when you read articlesabout shares, little ismentionedaboutthefinancialfigures of the business andwhen they are, little detail isconsidered.

This is because it isboring. Boring doesn’t sellnewspapersorforthatmatter

shares. What sells is hope.Words sell, not numbers. AstheysayintheUS,don’tsellthesteak,sellthesizzle.

As someone interested inquality steak you can buy itcheapwhenit’sraw.

Fewpeoplecareaboutthefinancial facts, even if that isexactly what they should bewatching. This is a part ofhumannaturethatgivessmartdiligentinvestorsanedge.

Asapropervalueinvestor

you will have your criteriawhich you will tune overtime.Youwill comeupwitha few extra rules as you goalong and hopefully thatwillimproveyourprofitsfurther.

It is your criteria and thetools you use that willdetermineyourstockpicking;tips will have nothing to sayinthematter.

A value investor has aplanandstickstoit.

Thatplanshouldbethata

share meets a set of criteriaand that the criteria must bedrawn from the basis of aninvestment idea. A valueinvestor doesn’t have to buyevery value investmentcompany that comes along,they should collect thestrongest. They should buythe best of the best, a sharethatstandsout.

Whendecidingtotaketheplunge to buy a share,remember the gold miners’

saying,“Ifyouthinkit’sgoldit isn’t. Ifyouknowit’sgolditis.”

It also must beremembered that when youstartonthisjourneyyoumayendupwith a largegroupofcompanies to pick through.Don’tworry, thereisnorushtobuy,tomorrowisasgoodaday to buy as today or nextweek.

The stock market willalways be full of prospects.

Whatismore,asmonthspassyouwill learnaboutdifferentcompanies and youwill startto know which are goodchoices and which are riskyor hopeless. Over time yourskill and knowledge willbuild,soitisOKtostartslowandbuildslow.Investingisameanstoanendnotanendinitself.Takeyourtime.

CriteriaThe following seven criteriaare the keys to how youshouldstartsievingdownthethousandsofstocksyouhaveto choose from to find thesharesyouwanttoown.

Every day some shareswill rocket up and somewillslump down. As such someshares will disappear off the

list and some will appear.Somewillgetmoreattractiveandsomelessso.

With tools like FilterX,you can throw away all thestocks in the market thatdon’t pass all these tests andyou can then evaluate theshares that have run thisgauntlet and only pick thejuiciestcandidates.

Youwillrarelyrunoutofchoice.

Ifyoumissonethisweek,

more will come along nextweek.Thechoicewillthininabullmarketandyouwillbespoiltforchoiceinacrash.Inthe end, the criteria must beyourpolestar tonavigate thestock market. Leaving thecourse set by the criteria isfull of peril and may welldoom your enterprisecompletely.

Donotworrythatyouarethrowing away amazingcompanies that will boom

when you filter the market.Unless you have a way ofsieving for super companies,the duds you dredge up aswell will more thancounteract the occasionalprofitablerockets.

You want a high successrate and you want to have agood reasonwhy themethodyou are usingworks. This iswhyvalueinvestingissuchagood way to make money.Meanwhilegettingluckyvery

rarely leads to gettingwealthyinthestockmarket.

FinancialCriteria1:P/E

P/EstandsforPriceEarnings.Roughly speaking it means:howmanyyearsprofitdoesittaketobuythecompany.

Expensive stocks have

high P/Es. It is notuncommonforP/Estohit30,50 or much more if thecompanyistheflavourofthemonth.

A P/E of 14 is aboutnormal.Thatmeansanormalprofitable company makesprofits equivalent to 1/14 ofthe price you would pay forthe whole shebang if youcouldbuyupall its shares atthecurrentpriceandownthewholebusiness.

The current value of acompany is what manyfinancial ratios revolvearound. This key value iscalled Market Capitalisation,MarketCaporMKTCapforshort.

If you take today’s shareprice and multiply it by thetotal shares it has issued toshareholders, you get thecompany’sMarketCap.

Let’s take an examplefromJanuary2012:

Vodafone has 50 billionshares.

Vodafone has a sharepriceof178.85pence.

Market Cap is therefore50 billion x 178.85 pence,

whichis89.5billionpounds.That’salotofmoney.NowithasaP/Eof11.77.This is because the share

priceis178.85andtheprofitsof the company (EPS) are15.2pashare.

P/E is therefore 178.85divided by 15.2 which givestheP/Evalueof11.77.

So if you bought thecompany,thecompanywouldtake 11.77 years, at thecurrent rate, to earn back

whatyoupaidforit.Clearly this is better than

waitingtwenty-fiveyears.As such, the lower the

P/E is, themore attractive orcheapthecompanycanbe.

If you were buying asweet shop you wouldn’thavetopaymuchmorethana3 P/E, because smallbusinesses are thought of asprecarious. If you wereselling an internet businesswhich was exploding with

growth, 100 P/Emight be inorder.However,ifthemarketaverage is 14, then anythingbelowmaybecheap.

There are pitfalls ofcourse. The future is notcertain and a company maynot be able to carry onturning in good profits. Acompany that last year didwell and earned a low P/Emay have imploded this yearleaving its P/E just a legacyfrombettertimes.Inthatcase

the next figure will show adifferentpicturealltogether.

It can get even trickierwhen people use predictedfuture earnings to come upwith a P/E, as often happensin the US, with a so calledleadingP/E.

All good criteria havetheir drawbacks, which iswhy we use a number ofcriteria together and whywecheck and double check tomakesurewedon’tmakeany

mistakes with our stockpicking. By carefullycovering as many angles aspossible we increase ourchances of being right andmakingmoney.

Forexample,youcanpullup the company’s previousperformance and you canread all its news, so you canunpack the company’s storyanddecideforyourself if theP/E is low for a good reasonor low because the company

is cheap. This is where youdevelop your skill andincrease the profit you canmake.

So what value of P/Eshouldyoulookat?

Anythingbelow10.Anythingbelowa10P/E

is interesting. Below 10 isvalueinvestingterritory.Youmightlookatsharesbelow12iftherewasabigbullmarketmakingeverythingexpensive,but generally you shouldn’t

bother.A P/E of 10 is a good

ceiling. The lower the better— 7 or 8 P/E tends to beideal,but inacrashP/Escanget a lot lower, so anythingabove1shouldgetacheck.

In normal marketsanything below a 3 will turnouttobeadeadcompanythathas just imploded. However,they are still worth a lookover. The nearly deadcompaniesarejustthesortof

sharesyouwanttolearnhowto spot. Do a post mortem;learn what a stock exchangedisasterlookslikeandhowitgotthere.

Some companies can bewrittenofffordeadbutifyoulookveryclosely,theyhaveachance of surviving. Thiskindofcompanycanbeabigwinner but they are verydangerous.

You should check themout but theywill most likely

failtheselectionprocess.Theother criteria you will besearching with will probablyweed them out, butsometimestheywon’t.

AP/Eofaround7or8isasweetspot;thingsgenerallygetdicierunder5.

Remember the lure ofexcitement and greed is notyour friend, yet once againyou should look and studycloselyifcriteriaaremet.

RecapCriteria1

A value investor shouldthrow away all companieswhose P/E is above 10 andbelow1.

FinancialCriteria2:DividendYield

Ifacompanypaysdividends,

you get a payment from thecompany simply for being ashareholder. You do nothingand the money comes yourway. This money cannot betakenback.

Prices rise and fall, butdividends only fall on yourdoormat. They are a strongsign that the company hasprofit and money and in themain,thevalueofthemoneypaid out to you twice a yeardoes not drag the company’s

share price lower in the longterm.

If a company’s shareprice is 100p and it pays out10p in dividend then itsDividendYieldis10%.

In thisexampleyougeta10% pay-out of thecompany’s value every year.It comes from the profits thecompany is making. That is,after all, what companieswereinventedfor.

Thisdividend isnormally

paid out twice a year; asmaller interim dividend anda fat final dividend pay-out.There is such a thing as aspecial dividend too when acompany pays out a one-offdividend.Thisisnotcommonbutithappens.

Here is an example: theinsurancegiantAviva.

This company is payingout a cool 7.13% dividendand,besides,hasa7P/E.

This is just the sort ofcompanyavalueinvestorwillbereadingupon.

So what parameters are

we sieving the stock marketforwhenwelookatDividendYield?

Cutoutcompanieswithadividendyieldlessthan3%.

This is a pretty highhurdle to climb. In an era oflow interest rates, 3% is anicereturn.Lessthanthatisabitmundane.Youcoulddropthefigurelowifyouareshortof stocks topickbut3% isagood cut off point to startwith. You are of course

cutting out all thosecompanies not paying adividend at all. RememberyouareplayingScroogehere.Who needs small dividends,bahhumbug!

Cutoutcompanieswithadividendyieldabove10%.

If a company has morethan a 10% dividend, thechancesare thecompanyhasimploded.JustlikealowP/E,acompanywithanenormousdividendbasedon lastyear’s

pay-out may be in terribletrouble.Exceptionstothisarevery rare. Such dividendyields appear to be hugebecause a company has hitthe rocks and its share pricehas utterly collapsed, say,from 100p to 7p. Thereforelast year’s 1% dividend nowlookslikea15%dividend.

The bad news is thecompany is sunk and is notgoing to pay anotherdividend, so the high

dividendisamirage.Once again you need to

read the news about thecompany on ADVFN, goback a few years of historyand try toworkout the storyof the firm. Check the sharepricechart to see if it tankedin a day or fell away overyearsandmaybecheckuponthebulletinboardsincasethegossip gives you an insightinto the ‘behind the scenes’story.Makesurethereasona

dividend is high is notbecause the company iscrumbling into bankruptcy.Judge whether the companyis going to pay out this yearand is likely to pay out nextyeartoo.

RecapCriteria2

A value investor should pickcompanies with a dividendyieldbetween3%and10%.

FinancialCriteria3:50%FallFromSharePriceHigh

The classic criteria forselecting value stocks is thatthe share has more thanhalved in recent history —that could be in the previousyear or even three to fiveyears.

The idea is that if the

company’s business hasn’tchanged much, or perhaps itmight even have improved,thenthesharepricefallisnotbased on the company’sbusiness but on some otherfactor.

Therearemanyreasonsasharepricecanfall.Therecanbe a big seller trying to turnhissharesintocash.Thiscanbe a founder’s estate or afund that is a forced sell dueto technical factors.Awhole

sector can be out of favourand as the investmentindustryflipsintothenexthotsector, the stocks they areselling get smashed. Thereasons for a falling sharepricecanbemanyandvaried.The trick is to find stockshammereddown fornogoodreasonatall.

This is one of the factorspeopledon’t likeaboutvalueinvesting: they have to buydorky stocks. People will

often say to me, “Why buythatshare?Itisgoingbust.”

When you ask why, theysay, “It is obvious becausethe share price has fallen sofar.”

It might be true, but theshare price won’t tell you;however, things like the P/E,dividend yield, and its salesperformanceetc.will.

Yetnotmanypeoplestartfrom this more numeratestandpoint; instead they go

with the flow and buy risingstocks everyone says areamazing and avoid anythingunpopular.

Again they will invest intips and opinion rather thanthe financial numbers. Thismakeslifemucheasierforthevalueinvestorwhoisineffectoperating scientifically or atleast more scientifically thanthose driven by rumour, tipsandhearsay.

You can of course only

select companies that havefallen 60%ormore, or 40%,but50%isagoodbenchmarkand it will cut out a lot ofshares from your selectionuniverse. You can take oneyear or three or five.With atool like ADVFN’s FilterXyou can play aroundwith allthe parameters and focus inon the sweet spot of themarket that looks mostfruitful.

RecapCriteria3

A value investor should pickcompanies that have fallen50% from a medium termhigh.

FinancialCriteria4:DirectorsPurchasing

Peopleareoftenimpressedby

public company directors. APLCdirector is a high statusandhighlypaidposition.Yetcompany directors put theirunderpants and panties ononelegatatimeliketherestofus.

Having met hundreds Icantellyoutheyare just likeeveryoneelseintheirways.

Justlikemostpeopletheydon’t want to waste theirmoney. Just like most of us,they aren’t rolling inmoney.

Theymightearnalotbutlikemost things to do withmoney, the more you havethe more you need andbuckets of spare cash is ararity even amongst the so-calledrich.

So when directors putstheir hands in their ownpocket and buy stock in thecompany they runs, it isbecausetheyaredeadcertaintheywillmakemoneyoutofthatinvestment.

The interesting thing isthat when directors buyshares in their owncompanies they have to tellthestockexchangesopeoplecansee themdoit.This is tostop them getting up tomonkey business, not ofcourse that that could everhappen. This is what peoplemean by transparency. Youcan see what they are up to.Directors buy and of coursetheyselltoo.

These ‘directors’ buys’are a very useful tool as theannouncement in effect tipsthehandofwhatthedirectorsthink about the futureprospectsoftheircompany.

Nooneknowsbetterwhatthe prospects of a companyarethanthepeoplerunningit.They know the good newsfirst and they know thehorrible truth about howmessy theirbusiness really isunderthebonnet.Theyknow

what’s going on from thecrow’s nest to the bilges.Theyhavesuchagoodgraspof the potential of thebusinesses they run that theyare banned from buying orselling for a largepartof theyearandhavetogothroughafairamountofpaperworkjusttodoatrade.

Directors don’t like tolosemoneyholdingshares intheirowncompanyeither, so‘directors buying’ and

‘directors selling’ areimportantselectioncriteria inthe decision of outsiders likeustobuyandsellshares.

These days there aremany ways directors can getshares in the company theyrun, so actually writing a fatcheckforsharesisabigvoteofconfidenceinthebusiness.The more they buy of theirown stock, the bigger thethumbsup.Alsothereismorethan one director in a public

company and these dayswives and important peoplein the firm have to tell thestock exchange what they’vedonetoo.Thismeansifafewdirectors are loading up onshares it’sastrongsignal thefuture of the company isbright.Themoreof themarebuying,thebetter.

Of course like all signalsthere are exceptions.Directors know that peopleare watching their buying so

iftheythinkthingslookdiceytheymaybuysomeshares tohelp prop up the share price,but theywon’t buymany. Asmallsub-£5,000buymaybetoken, especially if thedirector is earning a fat paypacket.

Sometimes when acompany is right out of cashand luck, the directors willbuy shares to put somemoney into the company. Ifthecompany isoutofcash it

is worth wondering whetherthisisthecase.

Sometimes the directorcan be mad and have ahistory of buying shares allthewaydownasthecompanyfolds.Youneed to check theRNS (Stock exchangeregulatorynews.)

This is an example ofwhat a screen of Vodafonenewslookslike:

Here is an example of RNSabout Vodafone, in this

example some financialresults:

Inamongstthenewsyouwillfind an RNS called

‘Directors’/PDMRshareholdings’ (PDMR is anacronym for ‘Persondischarging managerialresponsibility’).

What you want to readaboutispurchasesorsalesofshares by the directors andyou can ignore grants andgifts of shares by thecompany to its people as notrelevanttothiscriterion.

When you find out aboutthe buying and selling of

shares by officers of acompany you have a goodideaofitsprospects.

Assuchthevalueinvestorneedstocheckthedetailsandbalancethelikelihoodthatthebuys are simplestraightforwardpurchasesinacompanybecausethedirectorknowsthebusinessisworthalot more than the currentsharepricesuggests.

RecapCriteria4

Are directors buying, howmany of them have and howmucharetheyspending?Themorethebetter.

FinancialCriteria5:CashintheBank

AsharewithalowP/Eandahigh dividend can be andoftenisalsoonethatisonthe

ropes.That’sfineinitselfbutthe company must have thefuel to fight back to have achancetowin.

Adyingcompanythathasjust imploded can fit a lot ofthecriteriathatselectavalueinvestment but also be on itsway into bankruptcy. Wewant to avoid that stock.However a company with apile of cash can live to fightanother day and make acomebackandafatreturn.

Whenabusinessisoutofcash,itisoutofluck.

Abusinesscanevenbeingreat shape, but if it has nocash to pay wages it’s gameover. That’s common sense.Value investing is all aboutcommon sense. Valueinvesting is about havingseveral common sense rulesandcombining themtofocusinonpotentialwinners.

Acompanythatissaidtobe in trouble canbe just fine

if it has a pile of cash tobuffer it from its problems.This is exactly the kind ofcompany we want to lookinto.

While some companiescan be strapped for cash,others havemore cash in thebank than the company isworth. This might seemridiculousbutithappenstimeand again. In fact it is notuncommonatall.

Whenacompanyisoutof

fashionanddownonitsluck,a good cash pile is a safetynetandthebiggerthepilethestronger the protection it hasfromaterminalaccident.

For simple selectioncriteria any company withless thanamillionpoundsofcashshouldbecutoutof thegroup to research. This isbeing kind so as to leave incertain small companies thatmight be a good selection.However,youcouldmakethe

cutat£10millionoreven£50million in cash. Whereveryou put the cut, this willdispense with a lot ofcompanies.

The more cash youdemand the more likely thebusinessissound.Thereisnorocket science in thatassumption.

Later on you can revisitthe selections and trace thecash balances over the lastfew years. Any company

haemorrhaginggiantamountsofcashwillstandoutandyoucandumpthemormarkthemdownwhen you come to thefinalselection.

Here is a random screenshot showing how you cantrack cash using ADVFN’sFinancialspage:

I look at cash this way. If acompany is cheap and introuble but has a cash war

chest,itcankeepitselfgoingand away from the pillagersthat prey on failingcompanies. Cash gives acompanyflexibilityandtime.Cash is the power to surviveandovercome.

Looking deeper at acompany, a steadily growingpileofcashwill indicate thatthe business is actuallygrowing or at leastimproving.Growingcashisagood indication that the

business is going well. BacktoVodafone, for an exampleof a company with cashpouringin:

Whileaccountants canmagicprofitsinandoutofexistencetheycan’thidecash.Assuchcash is solid evidence thatthings might be just fine

behindthescenes.Thismightnot be in question with amassive blue chip likeVodafone,but foranobscurecompanyafractionofitssizethatmight not be clear at allfrommuchoftheaccounts.

Inhardtimescashiskingand companies that havehalved in value are in adifficult spot. This is whythey are cheap. It is theircapacitytoturnthingsaroundthat makes them good

investmentsand for that theyneedcashinthebank.

RecapCriteria5

The company should havemorethan£10millionofcashin the bank. The bigger thecompany the more it shouldhave, but a £10million baseline is a solid cut off. Youcan’thave toomuchcash, sothereisnoupperlimit.Againyoucantweaktheleveldown

butunder£1millionandyoucan safely conclude thecompanyhasnocashleft.

FinancialCriteria6:SalestoMarketCap

Itissometimessaiditiseasyto sell lots of stuff but it ishard to make a profit. Thelatterhalfiscertainlytruebut

the first half of the assertionisutternonsense.Itishardtosell lots of anything. That iswhy salesmen are so wellpaid — selling is hard.Anyone who has actuallytriedsellingwilltellyouit’satrickybusiness.

‘Sales’isalsothetoplineofabusiness,thefirstprocessthatdrivesthewholemachineof a company. You candispensewithlotsofthingsina business and it will keep

going.Youcouldtearouttheplumbing and businesseswould still carry on.However,stopsalesandmostcompanies would pack upandcloseindays.

As such, the sales of acompany are vital. Theimportance of sales is alsounderestimated, especially insnotty Britain. This makessales another good criteriontogocheckinginto.

Clearly if a company has

huge sales yet has a lowmarket cap then that is goodnews ifwe are looking for acheap share.There are a fewwaysthisworks.

For instance, say youhave two companies that dovery much the same thing.Let’s use the example ofmobile phones. If thecompanies sell roughly thesame amount yet are valuedwildly differently, as far astheirmarketcapisconcerned,

something might be wrongwith the company with thelow valuation, or thatcompanymaybecheap.

A good example of thiswas Orange, when it waslisted in London. It was inessence a very similarcompanytoVodafoneyetthecompany’s worth was muchless when compared poundfor pound in sales againstVOD,asinvestorscallit.

These companies were at

the time fighting for marketshare so it was hard to seeexactly how loss-making orprofitable they really were,butthesaleswereclear.

Orange was valued at afraction of Vodafone perpound of sales. That didn’tlast because French Telecomsnapped them up. Theywanted those sales and thatbusiness was cheap, so theytookitover.Iftwocompaniesare very similar except their

market cap/sales ratio areverydifferent, it is apositivesign for the lowly valuedcompanythatitischeap,asitis selling a lotmore per unitofmarketcapthanthesimilarbut more highly regardedbusiness.

Another reason why thisisagoodthingtostudyisthatsomecompaniesgetsooutoffashion you can buy theirwholebusinessforafewdaysof sales. If that company is

not about to go broke it isclearthebusinessischeap.

The reason is that if thecompanygets takenover, thenewownercansimplyextendcredit payment terms a fewdays and cover the purchasecost of the company withcash flow. That is a verytempting prospect forcorporateraiders.

This isexactlythesortoftrick that ‘private equity’ —companies thatbuyupcheap

publiccompanies—getuptoand many a ‘private equity’takeover has paid a valueinvestor a handsomepremium.

Likewise a new ownercan— and they do— sendall their creditors a 5% debitnote with a letter saying“please credit us this or elsewe will no longer buyanything else from you” andin thisway they hope to payfor the business in one fell

swoop.Thiswasthetypeofthing

that happened to Arcadia, acompany thatwent from30pa share to 400p a share in amatterofmonthsandyetstillpaid out its new ownerhundreds of million individends when it was takenoveratthatelevatedprice.Atonestageafewdaysofsalescould buy the business andthenthepricerocketedandinthe end ‘private equity’

gobbledthecompanyup.Ifabusinesscansellalot

of its products, it is likely tobewellrun.Whileallsortsofthings can go wrong with acompany, the more acompanysellsasaratiotoitsmarketcap themore likely itistobecheap.

An average company isvaluedat£1ofmarketcapto£1 of sales. That is a goodbenchmark. Some companiesare worth ten times sales,

some are worth 0.1 timessales;thedifferenceofcoursebetweenthosetwocompaniesis that one company’s salesare worth a hundred timesmorethananother’s.

It is clearly odd that apound of sales of onecompany can be worth ahundred times more thananother and this is the basisof why we look at thisnumber. Itmightnotbeodd,itmightjustbewrong.

Thevalueswearelookingforarecompanieswithasalesto market capitalisation ratioof less than 1. This means acompany’s sales total morethan the company can beboughtfor.

To start with we can cutout any company that isworthmorethanhalfitssales,orhasaratiogreaterthan0.5.We don’t need to be gentle;thereareplentyofcompaniesthat will survive this

guillotine.Acompanyworthonly.1

or 10% of sales is fine too;there are a lot of companiesdown there and they cancome roaring back. As suchweshouldinitiallysetthecutoff at 0.5, because valueinvestment style companiesselllotsofproductbutarenotconsidered highly because ofit.

RecapCriteria6

Exclude companies that arevalued at less than half oftheirsales.

FinancialCriteria7:Equity

Equity is a term which hastwo meanings in investment.Itmeans shares—a share isequity — and it means how

muchmoney the shares haveaholdover.

In this judgementcriterion, equity means thelatter; how much money isleft for the shareholders ifeveryonewaspaidoff.

Below is a diagram of acompany’sbalancesheet.Theleft column is liabilities andtherightisassets.

You can see they balance.The balancing item betweenassetsandliabilitiesisequity.

Thatisbecausesharesarea liability so that if you paidoff all creditors and otherliabilities with assets, themoney left overwould go to

theequityshareholders.Equityisthechunkatthe

bottomleft.Thisexamplehasanicefatlumpofequity.

If the company didn’thaveenoughassetstopayoffits creditors there would benothing left for the equityportion. So the less equitythere is, the less sound acompanyis.Somecompanieshaveminusequity,orasmostunderstand this idea,‘negativeequity.’

This means they do nothave enoughmoney today topayoffeveryone.Thismakestheir finances very shaky.Happily they owe banks andhave bonds and these aren’tgoing to be called on to bepaidoffimmediately;orsoitis hoped. If a company ismaking good profits it canroll these debts and carry onpayingtheirdebtsdown.Thisoftenhappens.

However if a company is

upthecreekthissituationcanbring down the house. Assuchequityisagoodplacetocheck.Themorethebetter.

But there is anotherwrinkle: assets calledintangibles. These are assetswhich are extremely vagueand really the only reasonthey are tracked is to stopmany companies fromavoidingtax.

No one ever boughtdinner with an intangible

asset,Iwonderifanyoneeverpaid a debt with one. Why?Because they are intangible— you can’t see, smell ortouchthem.

If, however, you buy mysoftwarecompanyforalotofmoney and there are nobuildings,machinesetc.,thenthe balance you appeared topay for that floppy disk ofcomputer code goes in thebooksas intangible.Thatcanbe correct, but the same

reasoningcanvalueallkindsofcrudasanintangibleasset.

Intangibles are slipperyandmanyamountainofthemvanishes in good time. Thismeans you should ignoreintangibleswhen you look ata company and then judgewhetheritcanpayitsbillsornot. A company with littleequityandalotofintangiblesmaywellbeadeadduck.Sokeep an eye on intangibleswhen making your final

selection.Here is an example of a

balance sheet of a companythat went horribly bust:Connaught.

Ifyoutakeouttheintangiblesof this council house draincleaning company then you

will see it owesmore than ithasinassetstopaythemoff.There was more perhaps tothis company than draincleaning but when the coldwinds of the credit crunchblew it quickly got flusheddown thepan. If it hadmoreequity and less intangibles itwouldbetradingtoday.

Again this is simply awayofrunninganothertestofthe companies you arelooking to buy. It is another

waytokickthetires.

RecapCriteria7

Discard all companies withnegativeequity.

No-Nos!Companiescanlookgreatbutin reality there is somethingnastygoingon.Thecompanycan fit all the criteria nicely,have a marvellous balancesheet, but still you want toinvokea special ruleandsayno thanks. Here are mine.You should look to developyourownovertime.Investing

isagameofskillandlikeallskill-based activities, skillwill develop with practice.The more skill you develop,the bigger your returns willbe.

No-No1:FamilyFirms

Blood is thicker than water

and family firms carry a riskthat business is not for thebenefitsolelyofshareholdersbut for the benefit of thefamily.

The chairman’s son maybeabrightguy,but itwouldbe incredible if he wasabsolutely the right and bestexecutive in theworld to runthe company. Who couldpossiblyimaginethatthefacthe is the son of the bosswasn’t a big factor in his

hiring?There is nothing wrong

withthisperse,goodlucktothem,becausewecanseetherelationship upfront anddecideaccordinglywhethertoinvest.Thisishowthemarketshouldwork,notthoughedictbut through transparency.That doesn’tmean, however,that family inheritance in thegovernance of a PLC is agoodthing.

When companies don’t

actinthesoleinterestoftheirshareholders,investorsshouldbeware. Over time I havenoticed many familybusinesses fail on themarkets, to be bought backfor a song by the familyshareholders. This makesthem as a whole groupdangerous to your wealth. Iapologise to scrupulousfamily firms, I’m sure thereare paragons, but an overallheightened risk means I

throw every single one ofthemoutofmystockpickinguniverse. I’m surely wrongabout some of them and I’msure it’s my loss, but as agroup their specialnessdisqualifies family firms outof hand. Someone else iswelcome to the gold nuggetthatgetsaway.

Apart from the risk ofclose family ties to outsiderstheoppositecanalsobeabigdanger. Families fall out and

then all sorts of internecineactions take place which candestroyabusiness.

The conflict of interestinherent in family firmsmeans that I will exclude avalue stock which is familyrun.

When it comes to family,family comes first, which ishow it should be; however, Idon’t want to be on theoutside of that arrangementwheninvesting.

No-No2:GovernmentFootballs

Governments areunpredictable things. Theirpoliciesareunstableandtheyare run by people who carelittle for economics orbusiness. Governments careabout politics and will warp,destroy and generally mess

up anything in business theytouch. Governments don’tcare about profits, they careabout taxation. Politiciansdon’t care about profitseither; they care about votesandgettinggoodpress.

Ifyouhaveabusinessandpoliticians think they can getvotesclosingyoudown, theywillcloseyoudown.

Youmightbeprovidingavital service, or be trying to,you might be employing

thousands, but if there arevotes in it to stomp on yourbusiness they will do itwithoutathought.

Cover a mountain withgiant windmills atuneconomic prices, noproblems.

Have a coal mine whichmight produce energy foreveryonecheaplybut is sitednear a pretty village withimportantvotesorwithsomerare amphibians nearby,

forget even trying to getgoing.

Political footballs arealways utterly vulnerable todisaster originating from thegovernment and politicalsystem. Once a share isensnared in politics it isimmediately poised on theedgeofdoom.

Ofcoursethereareplentyofexamplesbutanotableoneto research is Railtrack; Icould write a separate book

on that case and I’m suresomeone has. Companies gethorriblymashed up by beingtooclose togovernment timeandagain.

Ifacompanyisapoliticalfootball,justsayno.

Forexample,ittakesalotof nerve to hold anationalisedbanklikeLloyds,beingawarethatitonlytakesa single bad decision fromgovernment to kill the valueof that company. This is

ironicasIholdthiscompanyas of January 2012 and onlytime will tell if this rule-breaking position will biteme.Ifyouaregoingtobreakrules a huge amount ofconsideration is required, ifonly to have your excuseslined up when things gosouth.

No-No3:

FinancialRestatements

If you own shares in acompany that restates itsfinancial figures revealing ahole in its accounts, sell it.Onlyifitistrivialshouldyounotbailimmediately.

Certainly do not buy theshare that reveals accountingerrors of any material kindunless it happened a long

timeagoandthemanagementhas changed significantly.Eventhenbeverycareful.

Many companies thatrestate their figures promptlygobust.

It shouldn’t be the casethat there is any skulduggeryon the stockmarket but it isfairtosaynotmanyweeksgoby without some scandal orothercroppingup.

This is exacerbated bymodern accounting that

produces company accountsfar removed from a financialrealitywewouldrecogniseasamember of the public. Thearcane nature of accountsmeans that all sorts ofnonsense can go on in theshadows and then be buriedawayoutofsight.

An investor is reliant onthe company’s auditors andthe honesty of a company’sdirectors to makeinvestments. If these barriers

arebreachedthentheinvestorhasnothingtogoon.Assuchif a company reveals asignificant inaccuracy in itspast accounts, unless ofcourse miracles of miraclesthe company has done betterthanitthought,sellthesharesimmediately or refuse to buyany if that is the reason it is‘cheap.’ There are plenty ofcheapcompaniesandthereisno need to risk good moneyondodgyaccounting.

No-No4:LegalOutcomes

Don’tbuycompaniesthatarerelying on the outcome of abigcourtcasetochangetheirfortunes.

Thelawisnotknownasagood business model foranyone but lawyers andfunnily enough there aren’tany/many lawyers listed onthestockmarket.

This doesn’t stop certaincompaniesthatlookcheaponpaper to actually be relyingon some kind of pay-out incourt to keep them going.Sometimes this can pay off,but it’s simply not worthinvesting in the faint hope.Companiesmiredinlitigationdo not often prosper; themoreunlikelythecourtactionor remote from a decentjurisdiction the case is, theworsetheprospects.

This kind of thing oftenaffectsminingcompanies.Assoon as they hit pay dirtsomeone tries to muscle inusing the ‘interesting’ locallawsystemtotryandgrabthewinnings. This is a situationthat a value investor doesn’tneedorwanttoinvestin.

Let the lawyers maketheir money and steer wellclear.

ValueInvesting:HowToDoItInPractice

Step1:BuildaPortfolio

You have to be prepared tolosemoneywhenyou invest.Atleasttobeginwith.

This is just a function ofthe process. There are coststhatcanputyou2-3%behindandthenthere is thefact thatthere is no chance of buyingat theabsolutebottomofanycompany’sshareprice.

Roughly speaking, foreveryshareyoubuyonlyonein ten will not go lower andnever go lower than where

you buy it at. If you couldaccuratelypickthebottomforstocks youwould quickly bethe richestman in theworld.Value investing can makeyou the richest person in theworld— like Mr Buffett—butittakesalotlongerthanitwould ifyoucould judge thebottom of the market for ashare.

This is why Buffettdoesn’tseemtocarewhenhebuys a stock for $18 only to

see it fall to $6: because inthe long run it will be $100and maybe well more thanthat. You can’t pick thebottom or the top of themarket, you just need to buycheap shares and then sellthemwhenthestockhasgoneupandisnotcheapanymore.

Over time you will getintoprofit.

You will get into profitquickly in a bull market andslowly in a bearmarket.The

thingtorememberisyouwillbe right and you will bewrong, you will be unluckyand you will be lucky. Youhave a sensible system not acrystal ball, so you will winsomeandyouwill losesomeand the resultwill be a goodprofit.

Youreallydonotwanttobuy too few companies withyourmoney,youwanttobuya group of differentcompanies using the same

selection system so that theprofits are protected fromluckandgetsmoothed.

Buyingabunchofstocksis called a portfolio and itgivesyoudiversification.Themore stocks you have themorediversifiedyouare.

You know about nothaving all your eggs in onebasket.Thatiswhatportfoliodiversificationisallabout.

Imagine you are reallygoodatagameofchance,for

exampleroulette.Let’s say you play black

and red and amazingly youcanget it right two timesoutof three,soyoushouldmakea fortune. However, if youput all your money on eachgo you would lose all yourmoney soon enough and bebroke.Bettinglikethat,you’dnever get rich. This in itssimplest form is why youdon’t put your money in toofewshares.Ifyouputallyour

money eggs in one basketcase share you can bewipedout.

Aportfolioprotectsyou.Alsofunnythingshappen

when you have more than afewofanything.

Takedice.Ifyouthrowonedie,you

will get a score between 1and 6 and the number oftimes thenumbers 1, 2, 3, 4,5,and6comeupwillbeevenacrossthewholerange.

Now take two dice andyou will find 7 will be theresult more often than 1 or12.Takeathousanddiceandthe result of throwing themwillveryoftenbeinanarrowrange of the possible totaloutcomes. The number ofdice involved smoothout theresult.

Do this with a milliondice and the likelihood of asmall range of results willincreaseevenmore.Themore

dice you throw the morelikely the result will be thesameeachtimeandofcoursethe average result for eachdicewillbecomemorestabletoo.

Sharescanbelikedice;abunch of them will smoothout the results of yourselection.

It makes your resultssmoothandclear.Thereisnowonderingifthingsaregoingtoowellortoobadly,because

a portfolio spreads your riskand makes your profitssmooth.

Aportfolioisagoodwayto take the stress out ofinvesting. Who needs morestress?

ItrackmyportfoliousingADVFN’s excellent portfoliocharting tool. I can see theday-to-daytotalprofitchangeandgaugeif thingsaregoingmywayoverthelongterm.Italso lets me track defunct

portfolios I may have closedoutonlongagoanditletsmecreatetheoreticalportfoliostosee how an investment ideaturnsout.

Whynotputallthosetipsinto a portfolio and see howyou get on — who knows,maybe someone is a hottipsterafterall.

Belowisanexampleofaportfolio of companies Ithoughtmightgettakenover,which I built in theory using

the ADVFN portfolio tool,just before the roof caved induringthecreditcrunch.

With this image I can see afew obvious lessons staringme in the face. Takeovertargetsgethithardinacrash,rallyhardandifyouhaveOK

stocks and you are preparedtohangonto them for a longtime then things tend torecover...Butthat’snotthepoint. The point is that thebehaviourofaportfoliogivesyou an insight to how in themedium term you are doingand if you are doing yourinvestingcorrectly.

This chart tells me thatbuying takeover targets in abull market can be a riskygame.Sothat’sonethingI’m

notplanningtodo.

Step2:PortfolioSize

To be a sensible valueinvestor you need thirtysharesinyourportfolio.

Youmightsay,holdonamoment, thatmeans I needabig slugof cash to get going

and I don’t have that muchmoney.

ThatisOK.Let’s sayyoubuy£1,000

of a share that you decide toinvest inafter runningall thecriteriaandrules.£1,000 isasensiblequantity.

You will therefore need£30,000 to buy a properportfolio.

But you don’t have£30,000 right now.What areyoutodo?

Allisnotlostasinvestingis going to be a long termproject.

You can start with oneshareandsaveforthenext.

As themonthspass, evenyears, you will expand yourportfolio towards the thirtytarget.

Asyoudosoyourresultswill smooth out. As long asyou keep the size of yoursharebuysinanycompanytoan initial purchase of £1,000

each time, your profits andfurther investments will getyoutoathirtyshareportfolio.As you progress the benefitsof a portfolio willincreasinglykickin.

Apuristwould selldownanysharethatdoesverywell,so if youwere lucky enoughtodoubleyourmoney inoneshare,youwouldsellhalfandfind another share. Howeveryou shouldn’t obsess aboutthiskindofthingtoomuch.It

will be a nice problem tohave at some point but it’sreally better to keep thingssimple.

Step3:MakingaSelection

Let’ssayyouare justgettingstarted.

First things first, do you

ownsharesnow?If you do, get them into

yourbrokerageaccount.Then examine them. If

youdon’tknowwhyyouownthem or why you boughtthem,orexactlywhyyouarekeepingthem,thensellthem.Neverownanorphanstock.

For fresh beginners,prime your account withsomecash.

Decide your investment‘clip.’

This is the amount youbuy of a share you want toadd to the portfolio. Itmightbe less than £1,000 a sharebut £1,000 is really a goodminimum. Definitely do notinvestlessthan£500.

Why? Because the costsofbuyingandsellingusuallyhave a fixed minimum andthiswill eat toomuch of theprofitpercentageyoumakeifyouowntoosmallanamountofshares.

So you are ready to buyyourfirstshare.

Firstly you must trawlthrough a sea of stocks toselect thebest tensharesyoucanfindthatfitthecriteria.

Here’s how you do thatusing FilterX on ADVFN asanexample.

To use FilterX you needto registerwithADVFN.Goto the website athttp://www.advfn.com andclick the FREE

MEMBERSHIP button toregister.FilterXisfreetouseand ADVFN charges younothing to use it, or for thatmatter any number of itssmart tools. It cando thisbycarrying adverts from stockbrokers,etc.Italsohassupersophisticated products forkeen traders who need theirpriceinformationinrealtimeandwhoneed to see into theinner working of how pricesare formed, using tools such

asLevel2.Meanwhile value

investors can use FilterX forfree, no charge, nada. TheycanalsogotoasectioncalledFinancials where everycompany on the Londonstock exchange has all itsbalancesheetsandresultslaidbare.Thissortofinformationused to cost thousands ofpounds,butthedataisfreeonADVFN.

To use FilterX, you log

onto ADVFN, click onFINANCIALS and thenFilterX.

You build a filter using thefinancial criteria, discardingall companies that don’t fitthem.

To construct your newfilter, click STARTFILTERX.Yougetalonglistof all companies on theexchange,whichyoucanstartto prune down to those youareinterestedin.

Start by adding columns forall the criteria you are goingto use, by selecting from thethree dropdown boxes. ThecolumnsIaddare:

P/E ratio (from KeyFigures)Dividend yield (fromKeyFigures)Cash (fromFundamentals)Price/sales(fromDeeperAnalysis)

% 1 year (from KeyFigures)% 3 year(from KeyFigures)Equity (fromFundamentals)Bid(fromKeyFigures)

Soitlookslikethis:

Now you start to define thecriteria you want to use to

discard companies. Click onthe P/E number for anycompany and you will goautomaticallytoascreenthatlets you filter out ranges ofP/E:

Interestingly the tool tells usthata14isthemostcommonP/E on the London market.

By picking our criteria tofilter the UK market, 1,800companies are immediatelyremoved. We now haveroughly400tolookat.

AtthisstageI’mgoingtoremove all companies thataren’t tradingbyfilteringoutall companies who do nothave a ‘bid’ price, i.e. youcan’t buy or sell shares in.These companies may havebeenstopped from tradingorhaverecentlygonebust.This

makes scanning the columnseasier.

NowI’mgoing tozapallcompaniesnotpayingenoughdividends. Gone are allcompanies paying more than10%ayearorlessthan3%.Inow have 135 companies tolookat.

I’m now going to knockout all companies which areworth more than half theirsales.Inoteafterthelasttwoculls the remaining

companies have ‘sales tomarketcap’onaverageof1.5butthemostcommonvalueisjust above half times sales,nearthezoneIwant.

I’m now down to 62companiesinthelist.

AtthisstageI’mgoingtoadda column for market capvalue to thefilter,as thesizeof the business might sway

melater.Nowwearegoingtohack

away companies with lessthan£10million incash.Wenowhavejust31companies.

Here they are sorted bymarketcapitalisation.Itisnotsurprising that I own a fair

fewofthesestocks.Now if I knock out

anythingthathasn’thalvedineither thelastyearor thelastthreeyears,I’monlyleftwithtwostocks.Iownthemboth.

Idon’tneedallthestocksIowntostayinthisrange;itis only a signal to considerbuying in. Selling we willconsiderlater.

The beauty of the systemis even though we refinedown to two stocks, both in

this case solid educationaltechnology companies, I canseeawholebunchofwhat isknownas‘edgecases,’sharesnot totally fitting the criteriabutnonethelessinteresting.

Looking into these firmsfurther will highlight futurecandidates or perhaps acompelling candidate to taketo the next round or to justkeepaneyeon.

At this point we shouldselectthetenmostinteresting

companiesonthislist.Drawupaspreadsheetor

write them down on a scrapofpaper.

ThengototheirquoteonADVFNand find theirnews.Read the last coupleofyearsof the interim and finalaccountsstatements.Lookfordirectors buying. Check thebalancesheet tomakesure ithas equity and for anythingthat looks odd. Then scoreeach criterion out of ten,

using your judgement to ratethe companies for theirdifferentvalueslikethis:

Company C would be yourwinnerandaninvestorwouldbuy that. If you are carefulyou will surf the web andcheck out the company’swebsite etc. before makingthefinaldecision.

You can of course refinethis process a million waysandinfactintimeyouwill.Iveryrarelyneedtouseafilterthese days because I’mrunning the stock pickingscreeninmyheadeverytimeI lookat a share.Given timeyouwilltoo.

As theweeks roll byyouwillsoonhavevaluestocksinaportfoliothatwillovertimegive you a good return andyou can repeat the process

every few weeks to see ifanythingnewhaspoppedup.You can play with the filtermakingthecriteriatougherorgentler as you go. Thisframeworkwill soon get youfamiliar with a lot of sharesand keep you on a sensiblepath.

Step4:

BuyingShares

Comingupwithlistsoflikelysharestoputinyourportfolioisnogoodatall ifyoudon’tactually put all that theoryinto practice, and buy someshares.

Forthatyouneedabroker— a company that sorts outthe buying and selling ofshares and charges you forthat service. You open an

account with a broker, sendthem some money, and thenbuyandsellstocks.

Opening a brokerageaccount has got harder overtheyears.Weareprobablyallfamiliar by now with havingto prove who we are whenopening bank accounts andsuchlike,andlikeabank,thebroker will want utility billsand copies of passports ordrivers licences with mugshots. Allow yourself a

couple of weeks messingaround to get an account setup.Itshouldn’ttakethatlong,but it’s best to have youraccount set up well inadvance because if youwanttobuya shareandyoudon’thave your account open youwillbestuck.

There are telephonebrokers and online brokers –some companies offer bothservices.

An example of an online

broker is The Share Centre(http://www.share.com).

I am happy to endorse thiscompany.

A Few OtherIssues

Issue1:InvestingCosts

Trading in and out of stocksis very expensive indeed.Doittoomuchandyouwillburn

throughyourcashandendupwithnothing.Tradingwithouta very, very, good reason istrading randomly. Randomtrading will make you winhalfthetimeandlosehalfthetime, minus the cost oftrading. You will note thiswill doom you to blow allyourmoney. Investing is notrandom and therefore youwill earn profits. Tradingrandomly only makes yourbrokerrich.

Churning yourinvestments can bleed youwhite.Don’tdoit!

TheaverageperiodIholda value investment is abouteighteenmonths. It can be afew days if I get excessivelylucky, it can be for threeyears if I see theopportunitytoofaroff. Itaveragesout. Italsokeepscostslow.

Turningmyportfolioovereveryeighteenmonthsmeansmycosts are less than1%of

mycapitalayear. If I turneditover twiceasfastmycostswoulddouble.IfIwentfastermy costs would begin tobecome prohibitive. Valueinvesting ischeapand that isone of the reasons itsucceeds.

Issue2:Charts

Charts can only tell you thefuture if you have spottedsomethingnooneelsehas.Ifyou read about a charttechnique in an old popularbook on charts, the schemewill not work. There is anarmy ofmaths PhDs lookingat the numbers behind chartswho have huge computerschurning through the data totryandpredict the future.Assuchyoucanhappilygiveuptrying yourself, unless you

areamathsPhDwitha largecomputer.

What you can do is usecharts to predict the past.Everyonecanpredictthepastbutthepastcanbereassuringand informative. It can tellyou about the story you arebuyingintobutdon’thopetoget too much of an insightabout tomorrow. Of course Idon’t follow my own adviceon this, but that is onlyhuman nature. There is no

harm in trying to predict thefuturefromthechartsbutthereality is if you could do itreliably you’d make all themoney in theworld, like JimEvans, the hero of mythrillers The ArmageddonTrade,TheTwainMaximandKusanagi.

By all means getacquainted with technicalanalysis,but remember,chartschemes of the past havealready been picked over a

million timesandpre-emptedtodeath.

Issue3:Selling

Classically when you see a30% profit on a valueinvestment you are meant tosell.Youwon’tgofarwrongdoing this. Occasionally a

stockyouhaveheldwillrunalotfurtheranditisfrustratingto sell out early on a stockthat thengoesup three, four,even ten times. There isprobably noway of decidinghow far to run your profits,but you will often berewarded by not beinggreedy. I tend to sell ataround 30% but if there hasjust been a crash and stockshave fallen massively, I willcling on for a jumbo rise.

Afteracrashyouholdontillnormality resumes and thensell.

However, a share can goupalongwayandthenfalltonothing; there isn’t a goodway of knowing.Our idea istobuywhenashare ischeapand sell it when it is NOTcheap. Anything beyond thisis not value investing, it’sgambling. As your skilldevelops you will get thehangofitorat leastfeelyou

have.Whenashareyouholdhas gone up enough to seemsimilartotherandomherdofcompanies, then it’s mostlikelyagoodtimetosellit.A30% rise will often achievethatgoal.

A few other ideas thatappeartoworkforsellingare:

Sell when the sharejumpsongoodnews.Sellonanybigrallythatseemstohavenoreason,

butperhapswaitadayortwoaftertherallyends.Sell when the share isbackornearlyback toasimilarvaluationratiotoshares in the samesector.Sell when a share hasrecovered to a level ithas traded atcomfortably in the past,whichrepresentsareturntonormality.Sell if an accounting

irregularityappears.Sell if you’ve forgottenwhy the stock is in theportfolio in the firstplace. (This can happensometimes.)Sellwhenatakeoverhasbeenmootedaspossiblein an RNS but not yetconfirmed. Perhaps waitadayortwofirst.Thisisinfuriating when thecompany jumps twomonths later but many

‘almost takeovers’evaporate.Sell when thenewspapers start saying,“Buy this stock,” afterthe share has alreadyrisenfromthegrave.Sell if you conclude theCEO is bonkers or acrook.

Issue4:

Compounding

If you canmake 25% a yearyouwillincreaseyourcapitalbytentimesinadecade.Thatmeans a hundred times intwenty years and a thousandtimes in thirty years and ofcourse ten thousand in fortyyears.

This is why Mr Buffetthassomuchmoney.Itisalsowhy it is hard to make 25%

everyyear.It also shows how even

with rates like 10%, smallamounts of moneycompoundedcanturnintobigpiles of cash given enoughtime.

This is why it’s good tostartyoung.

Compounding is the keyto this game and keepingcosts down and keepingprofitsunder taxshelters likeISAs is so important. Value

investing is a winning gameand winnings must beprotectedandnurtured.

IfyouareaBrit,startoutwith an ISA and build yourportfoliothere.Thinkof itasat least a five year project,better still ten or twentyyears. After a few years youwillnotbethefirstpersontobe shocked about howmuchcapitalyouhavebuiltup.Trynottousetheresulttobuildanew kitchen or move house,

the best is yet to come. Thebiggeryourportfoliogets,thebigger the impact on yourwealth.Doaspreadsheetandbuildan investmentplan thatfolds a growth figure into itlike the one below.Then seetheresultsoverten,twentyorthirtyyears.Itwillmakeyoureyesbugout.

It does look like a computer

glitch but it isn’t. Einstein isreputed to have saidcompound interest was thegreatest discovery of thetwentiethcenturyandeven ifhedidn’t,itis.

ConclusionSensible investing is notdifficult, it is just work. Thelessyougetpaidbythestockmarket in thrills and spills,themoreyouwillearnatitincash.

Value investing has beena very reliable method ofmaking money in the stockmarketand it isagoodplace

to start for people who wantto build upwealth and don’twanttobegamblers.

Value investing worksbecause investors build uptheir skill in stock selectionpicking under-priced shares.They do not risk much oftheir money on any stock inparticular and they knowwhat they are buying andwhy. This puts the valueinvestorinasmall,smartanddiligent group of people

buyingandsellingsharesandthis select nature is a largepartofwhy it is a successfulwaytomakemoneyfromthestockmarket.

Meanwhile others puntsharesonrumoursforthehellof it and someneverwonderwhy or even realise they arelosing a lot of money.Gamblers are like that.However, gambling is notcompulsory in the stockmarket and in fact gives

plenty of opportunity for thecareful and diligent to makemoney.

Thisbookisaboutgettingstarted, not all that can beknownaboutvalue investing,and it is most certainly nottheonlyway tomakemoneyfrom the market. It is,however,asoundplatformtobegin investing and one thatyouwillneverhavetovacate.In the end if all the valueinvestmentsweretodisappear

then forme itwouldbe timeto wonder if it was a goodmoment to sell up. This hasonlyhappenedoncetome,in2006, and it didn’t take longfor the following marketcrash to deliver me the bestselectionofvalueinvestmentsI’veeverseen.

TheEndAlso by Clem Chambersandavailable fromADVFNBooks:

101 Ways to PickStock MarketWinners

101 tips to help day traders,

investorsandstockpickerstofocusonwhatcharacterisesapotentially successful stock.Personally researched byClem Chambers, one of theworld'sleadingauthoritiesonmarketperformance.

There are 2000-plusstocks in theUKmarket, butyou don’t have to be afinancial guru or a degree-wieldingmathematicianinaninvestment bank to pick oneto invest in.You just need a

toolbox of simple ideas tofind likely companies youcouldaddtoyourportfolio.

Readsomesampletips:KnowYourCompanyCall Up the Financial

DirectorLook At What’s Hot in

theStatesGetDownWiththeKidsLook at Company

DividendsAvoidTaxiAdsAvoidT-shirtDealsLook for Info in Chat

RoomsCheck Out the

Company’sWebsite

101 WAYS TO PICKSTOCK MARKETWINNERSSAMPLETIP:

Know YourCompany

Youcandefinitelyinvestinacompany and know buggerall aboutwhat it does.Manyinvestors will be quite smuginthisfact.Thisisbecausein

a Bull market even a chimpthrowing poo at the FT tomakeitsshareselectionswillmakemoney.Nevertheless,itcan’t hurt to know what thecompanyyouareinvestingindoes.

You can actually know acompanybetter than theCityif you so choose.Howmanyhighlypaidfundmanagersgointo a cheap furnitureenterpriseordrop in todrinkattheoutoftownlocationsof

apubchain?You might actually do

businesswithacompanyandknowwhether its business isbooming or slumping. Youare assured to have a muchbetter view on the companythan any Oxford gradclimbing the slippery pole insomebrokerageintheSquareMile.

A chartist will sayeveryone’s opinions arealready in the share’s chart,

soyoudon’tneed toknowifthe CEO is bonkers or agenius, or whether itsbusinessissuddenlyboomingor not, because the marketknowsall.

This could be right, itmaywellberightforaBPorVodafone company, butoutside of the top 500companies, theCity is prettymuch lost foraclearviewofwhat is going on. The Citywilltellyouwithacurlofthe

lip that anything under£500,000,000 in value is asmallcompany.

This is great news,becausewhile they go off tolunch you can get to knowthese small companies indetailandgettospottheonesabout to rise above themyopicradaroftheCity.

Remember: the marketpaysyoutomakeitefficient.Getting to know companies,particularly smaller ones is a

place it will pay you to helpit.

101 WAYS TO PICKSTOCK MARKETWINNERSSAMPLETIP:

CallUptheFinancialDirector

Don’t be intimidated bysomeone with a grand titlelikeFDorCFO-restassuredthe FD of a PLC puts his

underpants on one leg at atimelikeeveryoneelse.

Frankly if he won’t takeyourcall,especiallyifit’stheCFOofasmallcompany,it’sabadsigninitself.TheFDisnotabusyman,orratherifheishemustbehaving trouble.He may not want to talk toyou; that’s anothermatter. Ifhe doesn’t want to talk toyou, you shouldn’t buy hisstock.

There are no paparazzi

outside his front door and ifhe’sanygoodathisjobhe’llhavetimeonhishands.Heisjustlikeyou,heanswerscallshewants and doesn’t answercallshedoesn’twant to take.If he doesn’t want to take aquickshareholder’scall,thereis a problem with thebusiness.

If he takes your call,that’s a thumbs upimmediately. If he’s onholiday, that’s a bad sign.

Some company directorsseem to be constantly onholiday; this shouldn’t fillyouwithconfidence.

OK, so the FD ofVodafone may be busy butmost small company CFOsshould be reachable. Whenyou get through, ask a fewquestions and gauge whetheryou’d buy a used car fromhim.Ifyouwould,thenthat’sa fair sign the company is ingoodhands.

NowyoucouldapplythisruletotheCEO.Heisthetopguyafter all.However,don’twaste your breath. The CEOis likely to be a first-classsalesman. He could sell youLondon Bridge if he wantedto.CEOsgettothetopjobbycharming thebirdsoutof thetrees. You will likely fallunder the spell as much asanyoneelse.

The FD, on the otherhand, is a number crunching

nerd. He can sell you a pupwithnumbers,butmagicwithwordsisnothisstrongsuit.

101 WAYS TO PICKSTOCK MARKETWINNERSSAMPLETIP:

Look AtWhat’s HotintheStates

In classic efficient markethypothesis, informationtravels instantaneously andprices jump to hit their

correct level immediately.You can see this at workwhennewsappears.Thepricespikes almost immediatelyandrisesinsecondstoanewlevel of balance. However,watch the market longenoughandyouwillseelags.Sometimes the lags lastseconds, sometimes minutesand sometimes hours. Orsometimes even weeks,monthsandyears.What’shotintheUStodaywillbehotin

theUKtomorrow.A prime example of this

was the dotcom bubble. TheUS Nasdaq market had beenfizzing for two years withIPOslikeNetscapebeforetheUK market experienced thebeginningofthefrenzy.Whatwas big in the US finallymadeitacrossthepond.

This has happened fordecades. The US originatesthebigideaandatsomepointit gets to the UK. Now it

doesn’t take too much efforttowatchUStrendsand,onceyou do, you will seetomorrowhappeningtodayintheUS.Thenyouaddthat toyour investment ideas andawaityouropportunity.

Over the past few years‘fracking’ has been big newsin the US… and it’s startingto become big news inEurope. Meanwhile you canfigureoutnowhow toget inonthegroundfloor.

101 WAYS TO PICKSTOCK MARKETWINNERSSAMPLETIP:

Get Down With theKids

Those pesky kids are alwaysonto the latest thing first.Asmature adults of the world,we are far too busy to spend

time searching out the latesttrend in order to turn ourworldsupsidedown.

Therearestillacoupleofoldergenerationsthathaven’tgot to grips with computersand maybe never will. Howwere they to know that theyshould have bought GoogleorApplestock?

If they had stalked theirgrandchildren they mighthave seen it coming becauseweird stuff that fascinates

kids often turns mainstreamlater.

Keeping an eye on whatkids are up to is anopportunity to get in earlybecausekidsdon’tbuysharesand the oldies in the City,who have all the money,don’tdonew.

At some point even thegrey-haired get the pictureand suddenly off goes thepriceof thestockmakingthestuff that the kids have been

lovingforacoupleofyears.This might sound

implausible, but anyonebuying Games Workshopwhen it got the rights to theLord of the Rings filmlicense, will attest that whilelittle metal figures pushedaround a board based on a’60s book loved by hippies,might sound quaint, it wasalso something that rocketedthe price of the company bymultiples.

Now if you had read thetrade press, known theproductandwatchedthekidspractically living in GamesWorkshop stores, you wouldhavemadeaprettypenny.

101 WAYS TO PICKSTOCK MARKETWINNERSSAMPLETIP:

Look at CompanyDividends

Dividends are great. Thecheques that pop through theletterboxarepreciousthings.For a start no one can come

and take them back, unlikethepromisesmanycompaniesmake.

Dividendsarelivingproofa company has at least theresourcestocoughupcashtoits owners. This might seemlike a trivial thing but it isactuallyastrongindicationofagoodbusiness.

Manybigcompanieshavethe sort of finances thatwould push families intobankruptcy court. Yet there

arecompaniesthatmakepilesof money and thesecompanies tend to paydividends.

The City isn’t much of afan of dividends, mainlybecause of tax. A growingcompany that can ploughback its cash into growingwon’t create a year dividendtaxbill.Beingabletoploughbackcashintogrowthshouldwork out much better forshareholders in the long run.

Sogoesthetheoryanyway.However,adividendfrom

an unloved company is agoodindicationit’snotaboutto go down the pan; what’smore it’s paying you out.Even big companies can bepaying out over 5% ofdividends, perhaps even 7 or8%.That’s a lotmore thanagovernment bond is paying,so the question is begged: isthe company cheap? If acompany paying a 5%

dividendgoesup20% itwillstillbepaying4%,soasolid,high dividend-payingcompanyhaspotential toriseunder the pressure of itsdividendpayout.

101 WAYS TO PICKSTOCK MARKETWINNERSSAMPLETIP:

AvoidTaxiAds

There are alsowarning signsthat indicate a stock issomething you should steerclearof—or, ifyoualreadyhave it in your portfolio,

consider offloading itsharpish.Ormaybe the signsshowastockyoucouldshort.

Forexample,taxiads.Unlike publicity, all

advertising is not goodadvertising. Taxi ads are asbad an investment omen asyoucanget.

For some reasoncompanies doomed to failurelove to advertise on and intaxis. It’s not a particularlyexpensivewayofadvertising,

atleastintermsofthesizeofthechequeyouhavetowrite.Nonetheless, taxis seem tocarrypublicity forcompaniesdoomedtogodownthepan.

This may be becausecompanies with a lot ofmoneytospendonamakeorbreak launch end upshovelling it indiscriminatelyinalldirectionsinanorgyofdesperate spending. The taxiliveryandseatadsareafinalresort in this carpet bombing

approach.As a money Yoda might

say:Throwingmoneyaround,a successful company doesnotmake.

It’snotthetaxi’sfault,assuch, it’s just that anycompany that is so desperateto push itself forwards withadvertising,isprobablyintheprocess of throwing somuchmoneyoutofthewindowthatitwillsoongobroke.

Of the army of dotcom

busts, few seemed able toresistthetaxiandeventoday,thenewbrandscomeandgo,nevertoreturn.

Keep your eye out forphone box advertising too;alsoagoodsignalforashort.

101 WAYS TO PICKSTOCK MARKETWINNERSSAMPLETIP:

AvoidT-shirtDeals

Another sign thatyoushouldavoid a company is shirtdeals.

From a common sensepoint of view, how can it

makesensetopaymillionsofpoundstohaveyournameonafootballshirt?

Undoubtedly a greatsalesman could present to usand dazzle us with scienceand have the ignorant scalesfall from our eyes to see infullTechnicolorwhyitmakesperfect sense to blow afortune on having yourcompanynameonabunchofyoungsterskickingafootball.I’m sure we wouldn’t be

swayedbythebraggingrightsofabigbunchofticketstoallthe games; for friends andfamilyandcustomerswithanamazing box with incredibleviews, I’m sure the reasonswill be strictly commercial.Isn’t the whole countrytransfixedbyfootball?

However, manycompanies doing these kindsof deal, and doing them big,havegonespectacularlybust.

AIG was on Manchester

United’sshirt,NorthernRockon Newcastle United’s. ManCity and Accident Group,CharltonandAllSports,WestHam and the XL airline; allthese companies camehorriblyunglued.

Perhapsacompanydoingashirtdealisactuallyjustoutofcontrol.

You can extend this ideato companies that put theirnames on stadiums and tofirms that sponsor Formula

One.Remember the Enron

Stadium and the ParmalatFormulaOneteam?

This of course could bewhat is known as observerbias,insomuchasyoudon’tnotice companies that dothesedealsanddon’tgobust.

Yet even so, the thoughtis,whywouldyouthrowsuchtitanicmoneyaroundonthesekind of unaccountable dealswhich have no measurable

returnsifyouwererunningasmart business? ManchesterUnited is a great team, but$100milliontoputyourlogoon11shirtsissurelyasignofa kind of unexpressedinsanity.It’seasytocomeupwithalotofbadreasonstodosobutnotmanygoodones.

As such, when you’rethinking of selecting a stockor shorting one, this kind oftrophy marketing is a redflag.

101 WAYS TO PICKSTOCK MARKETWINNERSSAMPLETIP:

LookforInfoinChatRooms

Finding a good stock is allabout having informationabout companies and theirperformance—butwheredo

you look for those nuggetsthat will lead you to a greatinvestment?

One place is the internet— chat rooms and messageboards.

If you find that adiscussiononastockyouareinterested in is muted this isan extremely good sign.Silence is golden. That’sbecause people talk a lotabout stocks when they areunsure or when they think

their investment needs ashoveintherightdirection.

Conversely, when youfindasharewhichisthetopicoffuriousdebateonabulletinboard, whatever you do, donot buy it. The noisier thethread, the more virulent thelanguage, the more colourfulthe debate, the worse theprospects are for thecompany.

Dying companies attractthe attention of the worse

investors.Don’t join therushoflemmingstoacliff.

101 WAYS TO PICKSTOCK MARKETWINNERSSAMPLETIP:

Check Out theCompany’sWebsite

Another place to find outabout a company is thecompany’s website. It willtell you a lot about the

management.Many companies even

have photos of themanagement. These can betruly grim, but the point oflooking at the website is toevaluate the generalpersonality of the companyand look for clues of qualityorotherwise.

For example: an investorwas interested in amine in afarawaydesert.

On thewebsite it showed

the mine and work inprogress.

Themanagementwere ina few shots of themine, andits workers under the desertsun. Their faces were aswhite as a Scottish officeworker’s. Clearly they didn’tspendmuchtimeatthemine.

The equipment wasimpressive, but it seemedunscratched and dusty. Thebig trucks still had paintinsidetheload-carryingtipper

bays. Clearly not manytonnes of rock had beenferriedabout.

Whoeverhadputtogetherthe website hadn’t beenbriefedontheofficialstory.

Youshouldn’t invest inacompanywhichhasawebsitefull of wishful thinking.Likewise,agoodwebsiteisapositiveindicator.

***

There are lots more tips likethese in 101 Ways to PickStock Market Winners,availablenowfor theKindle.Find it in Amazon's Kindlestore: Click here if you'rereading this on a Kindle. Ifyou're using the Kindle appon an iPhone/iPad/computerthen go to the store andsearchforClemChambers.

ABOUTTHEAUTHOR

Clem Chambers is CEO of

ADVFN, Europe and SouthAmerica’s leading financialwebsite.

A broadcast and printmedia regular, ClemChambers is a familiar faceand frequent co-presenter onCNBC and CNBC Europe.He is a seasoned guest andmarketcommentatoronBBCNews, Fox News, CNBCArabia Newsnight, AlJazeera, CNN, SKY News,TF1, Canada’s Business

News Network andnumerousUSradiostations.

He is renowned forcalling the markets andpredicted the end of the bullmarket back in January 2007and the following crash. Hehasappearedon ITV’sNewsat Ten and Evening Newsdiscussing failures in thebanking system and featuredprominently in the MoneyProgramme’s Credit CrashBritain: HBOS—Breaking

theBank and on the BBC’sCity Uncovered: WhenMarketsGoMad.

Clem has writteninvestment columns forWired Magazine, whichdescribed him as a ‘MarketMaven’,TheDailyMail,TheDaily Telegraph and TheDaily Express and currentlywrites for The Scotsman,Forbes, RiskAFRICA,TradersandYTE.

He was The Alchemist –

stock tipster - in TheBusiness foroverthreeyearsand has been published intitles including: CityAM,Investors Chronicle,Traders Magazine, Stocksand Commodities, theChannel4website,SFOandAccountancy Age and hasbeen quoted in many morepublications including all ofthe main UK nationalnewspapers. He also wrote amonthly spread betting

column ingambling magazine InsideEdgeforoverayear.

In the last few years hehasbecomeafinancialthrillerwriter, authoringTheTwainMaxim, The ArmageddonTradeandKusanagiandhasrecently had his first non-fiction title 101 Ways ToPickStockMarketWinnerspublishedbyADVFNBooks.

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CONTENTSInvesting: How To GetStarted

WhyValueInvesting?

SearchingforCompanies

CriteriaFinancialCriteria1FinancialCriteria2FinancialCriteria3

FinancialCriteria4FinancialCriteria5FinancialCriteria6FinancialCriteria7

No-Nos!No-No1No-No2No-No3No-No4

ValueInvesting:HowToDoItInPractice

Step1

Step2Step3Step4

AFewOtherIssuesIssue1Issue2Issue3Issue4

Conclusion

AlsobyClemChambers:101Ways to Pick Stock Market

WinnersSampleTips:KnowYourCompanyCall Up the Financial

DirectorLook At What’s Hot in

theStatesGetDownWiththeKidsLook at Company

DividendsAvoidTaxiAdsAvoidT-shirtDealsLook for Info in Chat

Rooms

Check Out theCompany’sWebsite

AbouttheAuthor

ADVFN26ThrogmortonStreetLondonEC2N2AN

978-1-908756-02-2

www.advfn.com

Copyright©ClemChambers2012

TherightofClemChamberstobeidentifiedastheauthorofthisworkhasbeenassertedbyhiminaccordancewiththe

Copyright,DesignsandPatentsAct1988.Allrightsreserved.

Nopartofthispublicationmaybereproduced,storedinorintroducedintoaretrievalsystem,ortransmitted,inany

form,orbyanymeans(electronic,mechanical,

photocopying,recordingor

otherwise)withoutthepriorwrittenpermissionofthepublisher.Anypersonwhodoesanyunauthorisedactinrelationtothispublicationmaybeliabletocriminal

prosecutionandcivilclaimsfordamages.

Acataloguereferenceforthisbookisavailablefromthe

BritishLibrary.