I am seeing various mentions of "bargains" available, but the million dollar question is is how do you identify a bargain?
What kind of screening tools would you recommend to try to identify some?
How do I identify a bargain?
I just look in my portfolio - everything seems to be half-price.
How do we ascertain when a particular share has qualified for a certain screen category.
I don't think you can on the new site, it was a feature on the old site, used to tell you when it qualified and when it did not, going back some time.
On the screen you can run a check to see why stocks don't qualify, sometimes its because EPS forecasts are not available.
A bargain is a stock that sells for half what it used to, for no easily-discernible reason other than the fact that it is not a la mode!
You could look at the bespoke bargain screens or you could make a screen of your own. If you make a screen with a Graham multiplier of less than 22, Momentum rank of <40, value rank of >90 and quality rank of >90 you will see some interesting potential bargains in the UK and European markets.
Hi Weedubbya.
Just be careful on what is a bargain vs what has halved in value and is now priced correctly and/or still remains overpriced.
I like to open up the timeline of the chart and look to see how the stock was valued (perceived) pre covid. It's amazing to find so many "half-price" stocks have simply reverted to their pre-covid prices and the trend line whilst remaining upwards has simply returned to its pre-covid trajectory - slicing through the covid-bubble.
I suspect there are a variety of reasons here including the covid-bubble, but also the impact of inflation and fear of recession. It is important to look at the fundamentals and understand what has happened to the companies balance sheet, sales, profits etc. Have any of these factors changed that makes the price an anomaly and they have simply been sucked down in a market correction or is it something else.
Who knows what the markets may throw at us, but I fear we may not be finished with the drop yet.
In “normal” market conditions the value screening approach is very valid. But in today’s volatile market I’d define a bargain rather differently. Surely now is the time to pick up high quality, long term winners powered by secular megatrends. These will rarely meet the Graham number screen and never the value one. But a lot of them are on (relative) sale today and will get cheaper still if a recession becomes a certainty. The UK market isn’t flush with such favoured companies but there are pockets of quality. In retail, £JD. and Watches of Switzerland (LON:WOSG), driven by the growth in athleisure and the scarcity of luxury, look excellent and decent value respectively. In digitalisation, I like the share price and high margins of GB (LON:GBG) and Experian (LON:EXPN) . Meanwhile, all industrials are badly beaten up.
But I would temper those comments with the observation that I see higher quality companies at lower prices in Europe. The kind of company I have in mind derives most of its revenues from USA and Asia so is not substantially affected by the greater threat of recession in countries like Germany - but their share prices are! Adidas, ASML, LVMH, L’Oreal, SAP are all world class companies at knock-down prices. And there’s another layer of superb quality businesses like Schneider Electric, Lonza, Hexagon, Sartorius Stedim, Atlas Copco.
In fact, when I look at my UK holdings and compare them on an absolute quality basis with holdings elsewhere, there are very few - perhaps Relx, AstraZeneca, Diageo - that rub shoulders with alternatives globally. And it’s notable that these have held up better than the rest of the market.
