Reading : Investing Stretegies

Oct 2010 Money Today has an interesting article on Joseph Piotroski's style of picking up stocks. It seems he became famous with his method of selecting unpopular stocks that have the potential to become winners.

Here is his methodology:

1. The stock must have a high book value to market value ratio
2. Return on Assets should be positive & increasing
3. Cash flow from operations should be positive & greater than net income
4. Long term debt to asset ratio should be decreasing
5. Current ration should be increasing
6. Number of outstanding shares should not be increasing
7. Gross Margin should be increasing
8. Asset Turnover ratio should be increasing

When this was applied in Indian scenario for last 2-3 years, it seems to have beaten the BSE Smallcap Index. The Money Today article mentions details and name of stocks that passed the above filter.
I just wanted to make a note of the concept.


Regards, Rohit