The free data available to investors these days is amazing, even compared to the late 1990s when the internet and online investing took off.
I just spent the last few hours messing around at Zacks.com. You’ve probably seen a credit to their stock data on other general stock research websites, such as Globeinvestor or Yahoo!
They offer free and paid memberships. The free membership gives you access to their stock screener, which is probably the most comprehensive I’ve come across so far.
As a test, I created a Graham-like screen. Toward the end of his life, Graham was mentioned in articles as saying that he favoured very simple criteria, that there was no need to get fancy when it came to choosing stocks for investment.
In that spirit, the screen I ran today is based on Marty Whitman’s (Third Avenue Funds) “safe and cheap” mantra. Whitman uses different criteria, but there’s enough flexibility that the general idea comes through without following him slavishly.
For safe, I screened for stocks have long-term debt to equity of no more than 5 percent (that is, no more than 5 cents of debt for every $1 of equity) and a current ratio of more than 2 (that is, $2 of current assets for every $1 of current liabilities).
For cheap, I used a price to cash flow ratio of no more than 5. I could have used p/e, or p/b, or p/s ratios. In the p/cf ratio, cash flow is usually defined as cash flow from operations (taken off the cash flow statement), which is net income plus depreciation and adjusted for changes in working capital. That last adjustment gets at operational efficiency — companies that don’t require much investment in working capital as they grow will generate more free cash for their shareholders.
The one thing to watch for in this ratio is the amount of depreciation compared to net income. Companies that require significant capital assets will generate more depreciation, but the capex requirement ultimately will reduce the free cash available to shareholders.
I added the requirement for return on equity to be more than 15 percent in order to find companies that do produce actual earnings.
Here are the results (sorted in p/cf ascending order):
| Company Name |
Ticker | Debt / Equity Ratio | Current Ratio | Current ROE (TTM) | Price/ Cash Flow |
| CHINA CRESCENT | CCTR | 0.03 | 5.7 | 21.9 | 0.1 |
| PREFERRED VOICE | PRFV | N/A | 69.0 | 810.3 | 0.3 |
| SUNWAY GLOBAL | SUWG | N/A | 7.8 | 819.3 | 0.9 |
| JIANGBO PHARM | JGBO | N/A | 2.8 | 24.5 | 1.6 |
| RINO INTL CORP | RINO | 0.03 | 7.1 | 24.3 | 1.7 |
| INSTACARE CORP | ISCR | N/A | 3.3 | 28.6 | 1.7 |
| CHINA KANGTAI | CKGT | N/A | 3.8 | 28.8 | 1.8 |
| HALLWOOD GROUP | HWG | 0.05 | 3.4 | 27.3 | 2.2 |
| CHINA SKY ONE | CSKI | N/A | 8.8 | 21.3 | 3.0 |
| ZIM CORPORATION | ZIMCF | N/A | 6.1 | 23.3 | 3.3 |
| BENNETT ENVIRON | BEVFF | N/A | 9.5 | 48.9 | 3.7 |
| USA MOBILITY | USMO | N/A | 5.2 | 24.8 | 3.8 |
| BROADVIEW INSTI | BVII | N/A | 7.0 | 21.9 | 3.9 |
| DIRECT INSITE | DIRI | 0.02 | 2.2 | 32.5 | 3.9 |
| NET 1 UEPS TECH | UEPS | N/A | 2.1 | 26.6 | 3.9 |
| OPTI INC | OPTI | N/A | 9.5 | 96.6 | 4.0 |
| WESTERN DIGITAL | WDC | 0.05 | 2.3 | 29.2 | 4.3 |
| EXCEED CO LTD | EDS | N/A | 6.5 | 40.8 | 4.4 |
| EMERSON RADIO | MSN | N/A | 2.1 | 33.3 | 4.4 |
| ARTIFICIAL LIFE | ALIF | N/A | 5.9 | 19.2 | 4.7 |
| MIND CTI LTD | MNDO | N/A | 4.3 | 22.7 | 4.7 |
| CHINA EDUC ALNC | CEU | N/A | 18.5 | 21.8 | 4.8 |
| EARTHLINK INC | ELNK | N/A | 2.2 | 15.2 | 5.0 |
This kind of list is hard-core value. A bunch of small, mostly obscure companies. This sort of list is only the beginning of a search for investable value, but here are some general comments, in no particular order:
- Emerson Radio — which is not to be confused with the much larger Emerson Electric, though one wonders if there is a connection way back when, since Emerson Radio counts its history from 1912 according to their website. Radio trading at about $2 per share, having risen in stages to that price over the last couple of years. During 2010, it paid a special dividend of over $1 per share — management realizing that the company didn’t need to keep excess cash in the company. You might have seen the company’s radio, small refrigerators, coffee makers or other licensed products when shopping. Emerson has returned to profitability over the last couple of years (hence the special dividend), with perhaps more to come.
- Western Digital is the former tech high-flyer of the late 1990s. You probably have owned a Western Digital hard drive at some point; more recently, I’ve come across them for external hard drives.
- OPTi Inc.doesn’t seem to an active business anymore (according to a Wikipedia article on the company). It’s latest SEC quarterly report shows licence revenue. The Wikipedia article says that OPTi Inc. sold its technology to a company called OPTi Technology. If you research it further, be sure to keep each company straight.
- Bennett Environmental‘s symbol is for the Pink Sheets in the US, but investors familiar with Canadian companies will recognize the name as a former high-flyer some years ago. It’s trading for about $2 on the TSX under symbol BEV. A current p/e of 2.5, and a forward p/e just under 7.
- It’s interesting that a lot of apparently Chinese named companies show up.
- I get a little uneasy when the numbers look too good to be true. So the companies with a p/cf ratio below about 3, don’t really interest me on that point alone. Same for weirdly high current ratios (anything over maybe 6 or so — worthwhile businesses simply don’t have current ratios much higher than that) and unsustainably high return on equity (you might see ROE higher than 30 or so in an exceptional year; values over that level probably point to something weird and better ignored).
As I said, a screen like this is only a place to start one’s search for investable value.
Price Is Not Value 