Use This Simple Metric

Investment U View in browser IU Plus | Courses | Conference | IU Bookstore Sunday, April 12, 2015 When Obama Said "Yes We Can!" - Did He Mean YOU Too? You may recall President Obama's famous "Yes we can!" campaign speech, when he declared, "We are one people. We are one nation together." All well and good... but did you know that at the same time, he was quietly collecting as much as $5 million from a surprising source... one that more than 99% of all American citizens CANNOT access? But now, we've found a backdoor way you could get in... starting with just $15. And you will be SHOCKED when you see how much income there is to be made here. Details here. An Easy-to-Use Metric to Help You Beat the Market Andrew Snyder, Editorial Director, The Oxford Club Few things in life are simple. Investing certainly isn't one of them. We've talked a lot over the last few months about the idea of unleashing natural liberty through wealth. No doubt it's a rich topic, filled with ample opportunity for complications. Today, though... we'll keep it simple. Liberty is our destination, but there are plenty of steps or goals along the way. One of those steps involves getting educated - learning the best, most efficient ways to grow your wealth. When it comes to picking winning stocks, I'm convinced there is one simple metric that can greatly increase your success. It's one of easiest and most effective tools I know of. Here's proof... This chart is simple. The blue line represents the value of the S&P 500 over the last decade, while the green line represents a unique segment of the index. It's what's special about the stocks in that segment that you need to know about. Like I said, it's simple. The green line represents stocks that sport a price/earnings to growth (PEG) ratio between 0 and 1. I believe the PEG ratio is a metric every investor should use. It's straightforward and easy to understand. Think of it as a tool that gives context to the oft-touted and often misused price-to-earnings ratio (P/E). Where the P/E simply measures the price of a stock for every unit of profit it represents, the PEG ratio adds a third element... growth. For example, if a share of Widget Corp. sells for $18 and we expect earnings per share of $2 over the next year, it would sport of P/E ratio of 9. Simple stuff. But it doesn't have much context. That's where PEG comes in. This Week's Best-sellers: Tiny $6 Stock Poised to Surge After CDC Sole Contract The CDC just announced its plans to give a rare sole source contract to one tiny $6 biotech. This contract practically guarantees a monopoly for this company. The result? A potential 4,180% run-up in earnings. But you'll need to move fast. Go Here Now. "It's enormous, enormous! That's more than some OPEC countries!" The Bakken Shale... The Marcellus Formation... Eagle Ford... These huge oil and gas deposits are helping to make America the world's #1 energy producer. But now there's a new find... One larger than all three of those, combined. And one man's invention is going to help hundreds of people get very rich off of this development. Find out how right here. To calculate the PEG ratio for shares of Widget Corp., we simply divide that P/E ratio by the company's expected earnings growth rate. We get the price/earnings to growth ratio... or the PEG ratio. Let's say we expect Widget Corp. to grow its profits by 15% next year. Divide its P/E of 9 by 15 and we get 0.6. Because the number is below 1, this stock would fit into our special segment represented by the green line of the chart. But let's say Widget Corp. is having a slow year. Its bottom line is expected to grow by just 4%. In that case, the PEG (9 divided by 4) is 2.25... and the stock wouldn't fit our special segment. This is why the PEG ratio is so valuable. It adds context to the P/E ratio and it gives us a benchmark - sort of a pass-fail metric to measure our stocks against. Most folks use a PEG ratio of 1 as their benchmark. Stocks with a PEG higher than 1 are considered expensive, while stocks with a ratio lower than 1 are undervalued. As the chart above aptly proves... it works. If you simply had bought stocks with a PEG between 0 and 1, you'd have outperformed the broad market by more than 40% over the last decade. Like I said, nice and simple. If you want to learn about similar metrics, I urge you to check out Investment U's latest special project. It's a course that discusses the metrics Alexander Green has used over the last two decades to assemble one of the best track records in the business. Click here for the details. We'll encounter lots of complicated ideas on our path to financial liberty. When we find something that's simple... cherish it. Good investing, Andrew Snyder Editorial Director, The Oxford Club Click here to post a comment on InvestmentU.com We Also Recommend... Zero-Commission Stock Trading Has Arrived by Ryan Fitzwater Thursday, April 9, 2015 The just-released Robinhood app offers commission-free trading. But is the business model sustainable? Read On... What an Interest Rate Hike Means for Stocks by Matthew Carr Tuesday, April 7, 2015 No one is 100% certain when the Fed will raise interest rates, but sooner or later it's coming. Here's what you should know as an investor. Read On... The Janitor Who Left an $8 Million Estate by Alexander Green Monday, April 6, 2015 Folks who knew this 92-year-old retired janitor thought he had next to nothing... then they learned the shocking truth. Read On... You are receiving this email because you subscribed to Investment U. 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