Can someone recommend good web sites I can use to find stocks which may be currently undervalued, e.g. the lowest Price to Book ratio, the lowest PE and PE10, the highest dividend yield. Or maybe you can recommend specific stocks?
I don't usually do stock picking or market timing, just buy and hold index funds long term. However, I think this may be a good time to try stock picking and invest maybe up to 5-10% or the portfolio in undervalued individual stocks.
Our economy is far too dynamic to rely on ratios as an indicator that a company will be successful.
Those who buy distressed companies often do so as activist investors, meaning they want to influence the company to change course in some way. And they often lose their shirt anyways. Who has gotten rich by investing in failing companies? Far more people have gotten rich investing in growth companies. Retail investors would do well to focus any stock picking style investing on companies who they know create value. For example what other tabs do you have open right now? I've got FB & IG, Gmail, outlook, AMZN, Google news. So it's no surprise I invest in FB, MSFT, and GOOGL. That combo has handily beaten the market for some time and unless I'm missing something, will continue to beat the market for some time. They have moats and sticky ecosystems, and their valuations are not unreasonable. It is fairly clear to see these companies will continue to be major players. I assumed they traded at unfairly high multiples when I started stock picking, and have come to realize that might be true if Joe Schmo stock pickers like me moved the markets. But we don't. Institutional investors assess all companies, and the highly visible/attractive ones don't seem to come with too much of a premium. If they did, fancy pants Target would trade at a higher multiple than Walmart. But WMT trades at 23 while TGT trades at 15 times earnings.
Meanwhile, if a mid 20's PE ratio strikes you as too high, you just might go digging in the bargain bin and find a company with much more debt, much less cash, much less growth projected, much less intelligent employees & management, much worse margins and much stiffer competition.
Your plan could well end up with you losing a good chunk as you catch falling knives.
On the other hand, if you are willing to do a fair amount of research, find one or two companies that have fallen out of favor and you just can't understand why. Play devil's advocate and try to make the best case you can as to why they're doomed. If you ultimately find you just can't accept the negative thesis, and you see them sending the next 3-5 earnings calls out of the park, go for it. But don't be too surprised if you're wrong and learn to read between the lines when the CEO makes their statements and delivers guidance.
My Dad was a financial advisor who picked stocks for all his clients. I mostly got into it because I like woodworking and couldn't convince my Dad to get into woodworking. So now we talk stocks all the time.
