Comfort Zone Investing: Keeping It Simple ... Part 2

Filed under: Microsoft (MSFT), Citigroup Inc. (C), JPMorgan Chase (JPM), Bank of America (BAC), Comfort Zone Investing, AOL (AOL)

Last week's column gave five questions for investors to ask before they buy or sell a stock. Here are five more to help start any research. They'll help save a lot of time and more important, money and loss of sleep.

6. What is Price to Book? This measures the price you pay compared to the amount of equity that's in the company. Equity is all the money investors have put in plus all the profits. When you can find a company that is selling for a Price to Book of less than 1, it means you are buying the equity in the firm for less than it's worth. It's like buying $1 for less than a dollar. Hard to find these stocks? Not now in the Financial sector. Look at Bank of America (BAC). It's Price to Book is 0.54. That means you're paying 54 cents for every $1 of equity. Of course, investors think there could be many more charges against that equity before the bank stabilizes, but if they're wrong, an investor might be picking up a real bargain here. Other examples: JPMorgan Chase (JPM) at 0.89; Citibank (C) at 0.74.

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Comfort Zone Investing: Keeping It Simple ... Part 2 originally appeared on BloggingStocks on Sat, 06 Nov 2010 10:30:00 EST. Please see our terms for use of feeds.

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