How To Find Value In The Stock Market

how to find value in the stock market

How does one find value for money in the stock market?

Eddy Elfenbein of Crossing Wall Street recommends that investors start by inspecting two factors: a stock’s dividend yield, and its amount of debt relative to equity.

Conducting such a screen will pull up stocks that are appealing in terms of their yield — which may suggest low valuations — but may be lower risk than other high-dividend stocks, particularly in an environment in which the Fed is raising interest rates.

“Basically, it gives you companies with fiscal health, and also with good valuations,” Elfenbein said Thursday on CNBC’s “Trading Nation.”

While he would avoid the energy stocks this picks up, since he fears their dividends won’t be maintained, Elfenbein does respect Johnson & Johnson, which has been a reliable dividend-raiser.

Needless to say, one drawback of using publicly available information to make investment choices is that it’s, well, publicly available.

The widespread presence of screeners like this could be one reason that Johnson & Johnson and BlackRock, that don’t have much in common business-wise, trade almost in unison, suggests Evercore ISI technical analyst Rich Ross.

“That just speaks to the proliferation of these screens that use the same type of factors that Eddy is looking for,” Ross said. “So people are trading companies based the stats — not necessarily on the companies themselves.”

Still, Ross likes the names, saying J&J and BlackRock are “two names you can buy in an uncertain world.”

How To Find Value In The Stock Market Conclusion

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