The Best Investment Values in a Decade

In The Science of Hitting, baseball hall-of-famer Ted Williams revealed his approach to being a great hitter. And when a guy with a lifetime batting average of .344 and 521 home runs wants to tell you his secrets, it pays to listen.

Williams' approach was amazingly simple:

  • Get a good ball to hit
  • Proper thinking
  • Be quick with the bat

To determine what makes "a good ball," Williams dissected the location of various pitches to figure out which ones gave him the best opportunity to get a hit. For example, the best he could hope to hit with low and away pitches was a meager .230 -- while pitches straight down the middle gave him the chance to hit .400 (which he did in 1941).

Essentially, the pitches he chose to swing at could either send him down to the minors -- or vault him into the Hall of Fame.

And the same is true for you.

Get a good ball to hit
As investors, the difference between beating and lagging the market over the long run comes down to:

  • Finding great companies at great prices
  • Doing your homework
  • Making timely decisions

In other words, swinging at the investments that are the most likely to bring you big returns.

It seems obvious, but all too often we ignore this simple code and swing at overvalued stocks -- and in doing so, we reduce the chances of market-beating performance.

But when the market is panicking, we're presented with better opportunities to hit home runs.

Proper thinking
Tom and David Gardner follow the same philosophy -- good companies at great prices -- and it's paid off.

From April 2002 to May 2003, for example, they picked 24 stocks for Motley Fool Stock Advisor subscribers. Fully 23 of them have positive returns, including big winners such as Marvel (NYSE: MVL  ) , up 829%, and Amazon.com (Nasdaq: AMZN  ) , up 334%.

All 23 were already great companies -- but the dreary bear market environment allowed Tom and David to swing at these fat pitches and pick up great businesses at great prices.

Making timely decisions
These days we're presented with what Ron Muhlenkamp recently called "the best investment values we've seen in a decade." In other words, we're getting better pitches to swing at than we were in previous years.

One of the screens that Muhlenkamp uses to determine value opportunities is looks for companies generating return-on-equity figures above 15%, and price-to-earnings ratios below that figure.

Here's a sample list:

Company

P/E Ratio

ROE

Goldman Sachs (NYSE: GS  )

8.7

23%

US Bancorp (NYSE: USB  )

11.8

19%

Home Depot (NYSE: HD  )

11.6

17%

Hewlett-Packard (NYSE: HPQ  )

14.1

22%

Bed Bath & Beyond (Nasdaq: BBBY  )

14.4

21%

*Source: Capital IQ, a division of Standard & Poor's.

Using this measure, at least, we can see that there are plenty of good companies out there trading below the market's average P/E. That's reason enough for further research.

Foolish bottom line
We live in interesting market times. It can be a bit nerve-wracking to put money to work when others are pulling it out -- but those exact types of markets offer the best chance to build strong long-term gains.

If you'd like help finding great companies trading at great prices, a free 30-day trial to Stock Advisor is yours by clicking here. Tom and David have a pretty good track record in bad markets, to say the least. Since 2002, their picks have outperformed the market by nearly 38 percentage points on average. There's no obligation to subscribe, so what do you have to lose?

Todd Wenning wishes he could have hit like Teddy Ballgame just one time. He does not own shares of any company mentioned. US Bancorp is a Motley Fool Income Investor recommendation. Home Depot and Bed Bath & Beyond are Inside Value picks. Marvel Entertainment, Bed Bath & Beyond, and Amazon.com are Stock Advisor picks. The Motley Fool owns shares of Bed Bath & Beyond. The Fool's disclosure policy is legendary.


Read/Post Comments (28) | Recommend This Article (76)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 22, 2008, at 1:34 AM, dividendgrowth wrote:

    The best time to swing for value is when TMF invites people for SHORT ideas.

  • Report this Comment On July 25, 2008, at 10:57 AM, 41woodie wrote:

    Home Depot is dead in the water and will be for a long time to come. Bob Nardelli managed to destroy a company not only during his tenure but for the foreseeable future. A good reputation, once lost, is virtually impossible to regain. Thanks Bob for nothing.

  • Report this Comment On July 25, 2008, at 2:41 PM, mreedpgh wrote:

    Was the 24th 4-time recommendation SCSS?

  • Report this Comment On July 25, 2008, at 11:31 PM, willromanoff wrote:

    Why am I being asked to subscribe to Stock Adviser when I am already a

    subscriber?

    Wilfred Romanoff

  • Report this Comment On July 26, 2008, at 11:02 AM, EinarJoe wrote:

    I'm with willromanoff, wondering why my subscription just brings me more messages urging me to subscribe to more services......

  • Report this Comment On July 26, 2008, at 11:08 AM, Kay126 wrote:

    Fools, you have an irritating way of doing business.

  • Report this Comment On July 26, 2008, at 3:02 PM, ariann wrote:

    Can't you remove the subscribers from these articles that just keep asking us to subscribe without giving us any info?

    Ariann

  • Report this Comment On July 26, 2008, at 5:57 PM, wolfehound wrote:

    I'm with most of the comments below about subscription... its very annoying...

  • Report this Comment On July 27, 2008, at 1:21 AM, mrstricia wrote:

    As a new subscriber, the aggressive sales tactics have become irritating. Most paid subscriptions omit further advertisements therefore; I am beginning to wonder if WE are the FOOLS for subscribing in the first place.

  • Report this Comment On July 27, 2008, at 6:35 AM, soiseesurfer wrote:

    What feels like increased "come ons" from Motley Fool may be a sign of the times. Another service I use is Stansberry. The come-ons have definitely increased over the last six months. I suspect there are many folks who have hung up their stock picking hats and simply tacked their way into whayever they think is a safe harbor. The one bit of "advice" that seems to be a common thread is that "one can make money even in a bear market" (duh), and "this is the best time ever to pour over oversold stocks of companies that are really great". I'm not sure why anyone would object to getting these from TMF or anyone else. We certainly aren't forced to read it. It doesn't bother me that TMF, or anyone else for that matter, is hustling especially hard in these headwinds. I am.

  • Report this Comment On July 27, 2008, at 12:59 PM, MarkGMcConnell wrote:

    I reluctantly have to agree with the complaints about sales tactics. I let my SA subscription expire because I'm tired of this one-dimensional approach. If I wanted a persistent sales pitch, I'd spend all my free time at a used car lot. I'm very disappointed.

  • Report this Comment On July 27, 2008, at 1:04 PM, mjideas wrote:

    I find it amusing that receiving yet another request to subscribe to something.... I'm shown all these negative comments about the Fool's services.

    These guys were once very bright and helpful. I'm sorry the service has deteriorated to greedy, substandard tactics.

  • Report this Comment On July 27, 2008, at 6:41 PM, johnytrader wrote:

    What do you think about banks?

    For example tangilbe book value for stock AWBC(Nasdaq) is 7.42. The stock price is cca. 1.66. I don't think soo that there is a negativ goodwill.

    The bank try to save the situation.

    And the FSNM(Nasdaq) is also not so bad stock as it appear(tangible book stock value is 8.68). You can buy it for 5.68. What do you think is cheap?????

    I think so.

  • Report this Comment On July 28, 2008, at 8:07 AM, lt1beaty wrote:

    Getting tired of all the email to join another subscription, going to not pay my renewals for the two I have now.

  • Report this Comment On July 28, 2008, at 10:32 AM, AHU105 wrote:

    When I see in my mail "The Best Investment Values in a Decade" that is what I want to read. I dont want to be asked to subscribe to Stock Adviser over and over again.

    AHU105

  • Report this Comment On July 28, 2008, at 1:40 PM, KWT8011 wrote:

    I would like to know the 52 members who recommended this when it obviously has spurned quite a few.. goodness

    Want stock analysis from TMF? Click on the All Headlines link and look for articles about individual companies. Most everything else is a front for a newsletter.

  • Report this Comment On July 28, 2008, at 6:27 PM, MisterTojo wrote:

    Fools, that's what we are.

    The MF honesty is in the name. I bet those MF guys have a great laugh at our expense every time they get another fool to sign on.

    Stop with all the hard selling guys and show us the money.

    No, I do not want to join into your million dollar portfolio to go along with my hidden gems and my inside value and my rule breakers.

    At this stage I'd settle for a rebate on my subscriptions so that i can go out and blow whats left on a few beers.

    Stop with all the the different membership subs and charge more (If you have to) for a more streamlined service covering all your best research and ideas into one service.

    Yes, you do have some good ideas and you have contributed to my financial education but please leave me alone with all the hard selling emails. It just keeps reminding me of all my losses.

  • Report this Comment On July 29, 2008, at 12:54 AM, lemonshark wrote:

    Ditto, ditto and ditto. I subscribed to Stock Advisor and that's all I want to subscribe to now, and I don't want to be teased every day with information on investments that I can't find out about unless I shell out some more dough. Perhaps you could put these teasers in a different font so I could know to delete them instead of being sucked in.

  • Report this Comment On July 29, 2008, at 4:35 AM, runs50s wrote:

    I agree...I'm sick and tired of all the subscription notices, emails, and the like. I used to subscribe to Stock Advisor and Small Caps as well but kept getting the damn notes to subscribe that I let both subscriptions lapse...I don't need the b.s. from them.

  • Report this Comment On July 29, 2008, at 11:18 AM, bcn1 wrote:

    I agree with the above comments about the constant, obnoxious sales pitches. TMF is a master of putting out tempting titles to articles that make you want to read them thinking it could be something revealing, and yet it ends up being just another set up for a sales pitch. Give us more substantive content and less pitches!

  • Report this Comment On July 29, 2008, at 5:06 PM, slash5er wrote:

    When I get this kind of stuff in the "regular mail", I pack it all into the postage paid reply envelope and mail it right on back-- on their nickel. Too bad I can't do that with email.

  • Report this Comment On July 30, 2008, at 3:54 PM, rjs90843 wrote:

    I agree with my fellow fools, too much pitching and not enough meat and potato stock advice and quality information. I may cancel my subscription because of it. Please listen to your audience. I'm becoming disenchanted with your service.

  • Report this Comment On August 01, 2008, at 2:10 PM, Nomun4fun wrote:

    I completely agree with the others..

    Get back to the MF of old and leave the sales pitches to used car lots and Investment Brokers. When do we get back to investment ideas and helpful info? I'm not spending another penny with you (I read the Stock Picks I subscribe to already).

    Gumshoe has you guys listed about 2 to 3 times a month for teaser ads. This ridicilous advertisement is not the way I started with you but may be the way we part ways.

  • Report this Comment On August 03, 2008, at 6:01 PM, mcbriddu wrote:

    JUST ADD ME TO THE "DISAPPOINTED". I SPEND ENTIRELY TOO MUCH TIME TRYING TO FIND SOME WHEAT AMONG THE CHAFF. RENEWAL OF SUBSCRIPTION SEEMS OUT OF THE QUESTION!

  • Report this Comment On August 07, 2008, at 11:37 AM, jcss304 wrote:

    I've had respect for TMF but like others see you guys as marketing scam like all the other newsletters. If you would have stuck to your original adgenda of helping investors of all types then i would likely stay and keep my subcription.

    I'm to the point where i'm seriously questioning spending anymore money on TMF.

    I am more comfortable with the stockgumshoe information at this point. Someone who is really looking out for the newsletter teasers,...like i thought TMF was supposed to be about initially anyway!

  • Report this Comment On September 12, 2008, at 9:46 AM, steev57 wrote:

    So I'm rading alol the negative stuff and quite agree..here's my questioin.

    Do the people form MF ever respnd to these complaints..and if so , on what forum??

  • Report this Comment On January 10, 2009, at 11:41 PM, myoops wrote:

    after subscribing and reading initial information about all I can say is "oops".

  • Report this Comment On February 22, 2009, at 5:03 PM, teejk wrote:

    have to echo several comments above...I paid the subscription fee yet seem to be "invisible"...what exactly do I get for the $158???

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