Handyman Investing

     I recently went for a walk in my neighborhood and found an antique table discarded on the side of the road. The table had one leg broken-off and another leg shattered. I could not resist bringing it home to repair and refinish it. A few days later, the table looks worthy of my living room. What someone else saw as trash, I saw as treasure (with a little work). Stock investing can work the same way. For each purchase of a stock I make, someone is selling those shares to me. Beauty is in the eye of the beholder in women, goods, and stocks. I like to acquire broken things and either fix them myself or let someone else fix them (like the CEO in the case of stocks). Just like my antique table was very cheap (free), good stocks sometimes get cheap and deserve a second look. Even with the stock market at record highs, there are some stocks that are unloved right now. I recently ran a stock screen for stocks with a PE ratio below 10X and a PEG ratio of 1 or less. There were over 40 such stocks listed. There will always be a reason for a stock to be that cheap, the key is to decide whether the reason is temporary and fixable. One company that I am willing to take a chance on is Gilead Sciences. It is trading at 6 times earnings and has many sell recommendations on it, however, I am confident that they can develop new therapies for some of mans worst diseases. Gilead is guilty of selling drugs that actually cure hepatitis C, losing a customer every time. As usual, I placed a limit order for Gilead because tomorrow they report earnings. If earnings disappoint and the stock falls, I will get it even cheaper. If earnings are above expectations, my order will not be executed. I recently sold some big pharma stocks because their PE's were at nosebleed levels. I am more comfortable with a stock with a very low valuation for several reasons: if there is a market correction, value stocks will probably fall less than growth stocks, and any good news for Gilead could generate a nice pop for the stock. Exploiting the PE ratio would reveal the potential for Gilead. I am not recommending Gilead as an investment for most people because of the risk, I am just using it as an example of how I choose my investments. I need to be patient with this one because new drugs take a long time to develop and become accepted therapies but there is a 3% dividend in it for me while I wait.