Q: What is your investment process and criteria for investments?
Roy Ward: I am a value investor. I look for high-quality companies that are undervalued, and companies with strong balance sheets and low price to earnings (P/E) ratios. I use the criteria spelled out by the father of value investing, Benjamin Graham. Volatility is my ally. I buy when a good company is down in price and sell when the company’s stock price is bid up to unreasonable heights. I am looking to hold a stock for a period of one to two years or longer. Typically I find companies with short-term problems, but with excellent long-term outlooks. Benjamin Graham’s advice still holds true: “Investors do not make mistakes, or bad mistakes, in buying good stocks at fair prices.”
Investing in value stocks is quite different from growth or momentum investing. We look for stocks at bargain price, so price charts are of little use. We do not recommend selling a stock because the price is declining. If a stock is a bargain when purchased, it is a better bargain at a lower price–not a candidate for a quick sale at a loss. And we don’t try to time the market. We would much rather focus on buying low, holding long term, and selling high.
Q: If I buy a stock on the ex-dividend date, will I receive the dividend for that quarter?
Roy Ward: If you buy a stock on the ex-dividend date, you will not receive the dividend for that quarter. However, if you buy on the day before the ex-dividend date, you will receive the dividend.
Q: What gives you an edge over other investment experts?
Roy Ward: Several factors give me an edge. I look for investment opportunities in:
- Leading companies that are less volatile
- Companies with low debt that are unaffected by the credit crunch
- Companies whose stocks are undervalued and are less likely to decline
- Companies paying adequate dividends to boost returns during a longer term holding period.
My biggest edge is my Benjamin Graham-based method of calculating an optimum buy price and sell price for each stock in my database. I call my buy and sell prices “Maximum Buy Price” and “Minimum Sell Price.” I have taken the guesswork out of when to buy and when to sell. Buy when a quality company’s stock price declines to my Maximum Buy Price and hold until your stock reaches my Minimum Sell Price.
Q: What are your short-term and longer-term views of the markets?
Roy Ward: I try not to get caught up in market or sector forecasts. My objective is to buy stocks that are undervalued. Your goal should be to consistently buy leading companies at reasonable valuations. Then your long-term objectives will be met, despite wild fluctuations in the stock market. One of my favorite quotes from Warren Buffett is: “Look at market fluctuations as your friend rather than your enemy; profit from the folly rather than participate in it.”
Q: What sectors do you think offer the most opportunities to profit today?
Roy Ward: I measure opportunity in terms of revenue and earnings growth forecast for the next year or two. I recommend broad diversification with a focus on the consumer staples, health care, energy, and technology sectors. Other sectors, such as banks and homebuilders, are clearly undervalued, but forecast revenues are cloudy at best.