Low P/E Stocks with High Quarterly Earnings In A Live Portfolio

We find low P/E stocks with high earnings reports, and hold them. We are not in and out traders, or market timers. We look for low P/E stocks, and hold them for a year or years. We also like to see some earnings stability or growth. With the current macro-economic uncertainties, we also look to collect some dividends while we wait. We try to buy right after a surprisingly good earnings report, and hold until the P/E increases due to price increases (Yea!) or declining earnings (Boo!). Some academic studies have shown that both low P/E's and positive earnings surprises lead to above market returns. See our blog and our references below.

Right now, contrary to our general philosophy of not trying to time the market, we are mostly in cash. We are afraid of the current economy and of policies we think may prolong or deepen the recession. As of 05/15/09, we are projecting a double dip recession, or a single dip (the current one) followed by a slow recovery. Consequently, we are either in a Bear market rally, or a Bull market which will stagnate and flatten out for an extended period. Or, we are wrong.

We have been almost all in cash since 09/26/2008, when the SPY (the S&P 500 ETF) closed at 120.85, and proceeded to drop 43% to 68.49 by 03/09/09 (Whew!). Since we also had a lot of cash for 1 year before that, we have avoided most of the Bear market which started in 10/2007 (Yea!). Unfortunately, we have also completely missed the current rally which started in 03/09/09 (Boo!).

Undaunted, we have a list of low P/E, stable earnings, good dividend stocks which we are watching. We have started to buy a tiny amount of them as you can see from the trades above. We will probably buy more over the quarter, and continue to research low P/E, good earnings, good dividend stocks for purchase when the next series of earnings reports come out starting around 07/13/09. We tend to buy on the day they announce their earnings if their earnings reports are good, and if we don't lose our nerve worrying about the next dip.

The second table is a list of some of the stocks we are watching. Here are a few more which did not quite make the list, due to somewhat erratic earnings, but they my be worth watching: GE, MRO.

Check back here every day to see if our stock list and macro-economic projections have changed. Don't tell anyone else what we are doing! Good luck.