Comments on: Is the PEG Ratio a Valid Concept? http://alephblog.com/2008/02/23/is-the-peg-ratio-a-valid-concept/ Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control Thu, 18 Mar 2010 20:53:26 -0400 http://wordpress.org/?v=2.8.4 hourly 1 By: Bill aka NO DooDahs! http://alephblog.com/2008/02/23/is-the-peg-ratio-a-valid-concept/comment-page-1/#comment-16972 Bill aka NO DooDahs! Tue, 26 Feb 2008 01:52:23 +0000 http://alephblog.com/2008/02/23/is-the-peg-ratio-a-valid-concept/#comment-16972 Here are the results of holding the 30 largest (by market cap) stocks in the S&P 500 when they have PEG under 1.00 and price over $5. http://keelix.com/backtester/auth/displayjob.tt?id=204957 Switch out monthly. Returns DOUBLE the S&P 500's annualized gain since Aug 1997, with only a 50% increase in annual standard deviation. Here are the results of holding the 30 largest (by market cap) stocks in the S&P 500 when they have PEG under 1.00 and price over $5.

http://keelix.com/backtester/auth/displayjob.tt?id=204957

Switch out monthly.

Returns DOUBLE the S&P 500’s annualized gain since Aug 1997, with only a 50% increase in annual standard deviation.

]]> By: Josh Stern http://alephblog.com/2008/02/23/is-the-peg-ratio-a-valid-concept/comment-page-1/#comment-16970 Josh Stern Tue, 26 Feb 2008 00:08:49 +0000 http://alephblog.com/2008/02/23/is-the-peg-ratio-a-valid-concept/#comment-16970 Morningstar's screener calculates the "PEG payback period" as the number of years to earn the current market cap assuming linear growth. That could be improved by using some sort of profile growth curve (as you've done) and figuring the time to earn the current enterprise value instead. This might be a better number for value investor comparisons. My impression of most growth investors is that rather than hoping to make money by having their stock grow into a value stock, they are hoping to make money by buying stocks that stretch out the profile - i.e. they are looking for a "margin in safety" in the number of years of higher growth that are expected going forward. Morningstar’s screener calculates the “PEG payback period” as the number of years to earn the current market cap assuming linear growth. That could be improved by using some sort of profile growth curve (as you’ve done) and figuring the time to earn the current enterprise value instead. This might be a better number for value investor comparisons. My impression of most growth investors is that rather than hoping to make money by having their stock grow into a value stock, they are hoping to make money by buying stocks that stretch out the profile – i.e. they are looking for a “margin in safety” in the number of years of higher growth that are expected going forward.

]]> By: Bill aka NO DooDahs! http://alephblog.com/2008/02/23/is-the-peg-ratio-a-valid-concept/comment-page-1/#comment-16964 Bill aka NO DooDahs! Sun, 24 Feb 2008 22:45:51 +0000 http://alephblog.com/2008/02/23/is-the-peg-ratio-a-valid-concept/#comment-16964 You could actually try backtesting the PEG as a trading criterion .... You could actually try backtesting the PEG as a trading criterion ….

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