Reducing Risk -- Increasing Profits In Stocks
By John Lux
Most investment advisors will tell you that to increase returns you have to increase risk. Everyone wants to minimize risk and maximize profits.

You may be surprised to find that this conventional wisdom is not always true.


When I was a professional stock trader, I made most of my profits from appreciation in my portfolio, not in short term trading. As a trader, I made money by buying and holding. Any losses in my stock positions were taken out of my paycheck at the end of the month - in fact, I had to pay back any loss. If this is you, you want to know how to make large gains with little risk, and you want to know badly. I became an expert out of necessity. With almost no loses or losing months, I had gains of up to 300% per year.

In my stock picking, I first looked for that were so cheap they could not go down. If they did go down, I was happy to buy more because at those prices, you could buy the whole company and sell off the assets for a profit.

From this group of "safe" stocks, you select the ones most likely to have large appreciation.

A stock is cheap in my book if it sells below the liquidation value of its assets, and most cheap if it sells anywhere near the net amount of cash it has on hand. So the first two measures of value I looked for were book value per share and cash per share.

The value of the shareholders equity on the books is the book value. As you are a stock buyer, you will want to look at the book value per share.

When you look at book value, be aware that companies usually have intangible assets, things like goodwill. You have to take these intangible assets with a grain of salt. The thing to do to reduce risk is to check "tangible book value." Book value per share is often calculated for you in the various Internet financial stock search programs available.

The next indicator to look for is cash per share or working capital per share. Working capital

Stocks to Watch: Stocks to watch Friday: Osiris, Autodesk, Marvell
A handful of updated earnings forecasts go with a pair of dividend initiations among the notable corporate headlines for early Friday. <p><a href="http://feedads.g.doubleclick.net/~at/i4aQj2cX6W5jz-We_CrVqmaVXaE/0/da"><img src="http://feedads.g.doubleclick.net/~at/i4aQj2cX6W5jz-We_CrVqmaVXaE/0/di" border="0" ismap="true"></img></a><br/> <a href="http://feedads.g.doubleclick.net/~at/i4aQj2cX6W5jz-We_CrVqmaVXaE/1/da"><img src="http://feedads.g.doubleclick.net/~at/i4aQj2cX6W5jz-We_CrVqmaVXaE/1/di" border="0" ismap="true"></img></a></p><div class="feedflare"> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=CQYoLMYq9H0:kiynkizIwtw:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=yIl2AUoC8zA" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=CQYoLMYq9H0:kiynkizIwtw:F7zBnMyn0Lo"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=CQYoLMYq9H0:kiynkizIwtw:F7zBnMyn0Lo" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=CQYoLMYq9H0:kiynkizIwtw:V_sGLiPBpWU"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=CQYoLMYq9H0:kiynkizIwtw:V_sGLiPBpWU" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=CQYoLMYq9H0:kiynkizIwtw:qj6IDK7rITs"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=qj6IDK7rITs" border="0"></img></a> </div><img src="http://feeds.feedburner.com/~r/marketwatch/stockstowatch/~4/CQYoLMYq9H0" height="1" width="1"/>
Stocks to Watch: Stocks to watch Friday: Facebook, Ann
Among the stocks that could see active trade in Friday?s session are Facebook, Ann and Hibbett Sports. <p><a href="http://feedads.g.doubleclick.net/~at/NVLup0neW4tQsVvtx4lczVU_Xpc/0/da"><img src="http://feedads.g.doubleclick.net/~at/NVLup0neW4tQsVvtx4lczVU_Xpc/0/di" border="0" ismap="true"></img></a><br/> <a href="http://feedads.g.doubleclick.net/~at/NVLup0neW4tQsVvtx4lczVU_Xpc/1/da"><img src="http://feedads.g.doubleclick.net/~at/NVLup0neW4tQsVvtx4lczVU_Xpc/1/di" border="0" ismap="true"></img></a></p><div class="feedflare"> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=ns1OF62HSpE:iBQ0Q6W9awg:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=yIl2AUoC8zA" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=ns1OF62HSpE:iBQ0Q6W9awg:F7zBnMyn0Lo"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=ns1OF62HSpE:iBQ0Q6W9awg:F7zBnMyn0Lo" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=ns1OF62HSpE:iBQ0Q6W9awg:V_sGLiPBpWU"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=ns1OF62HSpE:iBQ0Q6W9awg:V_sGLiPBpWU" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=ns1OF62HSpE:iBQ0Q6W9awg:qj6IDK7rITs"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=qj6IDK7rITs" border="0"></img></a> </div><img src="http://feeds.feedburner.com/~r/marketwatch/stockstowatch/~4/ns1OF62HSpE" height="1" width="1"/>
Stocks to Watch: Stocks to watch Thursday: Boyd, HollyFrontier
A gambling acquisition and a batch of dividend increases will likely grab investors? attention as they sort through the corporate headlines early Thursday. <p><a href="http://feedads.g.doubleclick.net/~at/17UooGpno3gQioSFziBgjvwd3oc/0/da"><img src="http://feedads.g.doubleclick.net/~at/17UooGpno3gQioSFziBgjvwd3oc/0/di" border="0" ismap="true"></img></a><br/> <a href="http://feedads.g.doubleclick.net/~at/17UooGpno3gQioSFziBgjvwd3oc/1/da"><img src="http://feedads.g.doubleclick.net/~at/17UooGpno3gQioSFziBgjvwd3oc/1/di" border="0" ismap="true"></img></a></p><div class="feedflare"> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=tzUZtictwAc:SlBVTLh8PME:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=yIl2AUoC8zA" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=tzUZtictwAc:SlBVTLh8PME:F7zBnMyn0Lo"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=tzUZtictwAc:SlBVTLh8PME:F7zBnMyn0Lo" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=tzUZtictwAc:SlBVTLh8PME:V_sGLiPBpWU"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=tzUZtictwAc:SlBVTLh8PME:V_sGLiPBpWU" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=tzUZtictwAc:SlBVTLh8PME:qj6IDK7rITs"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=qj6IDK7rITs" border="0"></img></a> </div><img src="http://feeds.feedburner.com/~r/marketwatch/stockstowatch/~4/tzUZtictwAc" height="1" width="1"/>
Stocks to Watch: Stocks to watch Thursday: Wal-Mart, Sears
Among the stocks that could see active trade in Thursday?s session are Wal-Mart, Sears Holdings and Dollar Tree. <p><a href="http://feedads.g.doubleclick.net/~at/FaCQZqOsPmiKwyq0WJxLsSlcx78/0/da"><img src="http://feedads.g.doubleclick.net/~at/FaCQZqOsPmiKwyq0WJxLsSlcx78/0/di" border="0" ismap="true"></img></a><br/> <a href="http://feedads.g.doubleclick.net/~at/FaCQZqOsPmiKwyq0WJxLsSlcx78/1/da"><img src="http://feedads.g.doubleclick.net/~at/FaCQZqOsPmiKwyq0WJxLsSlcx78/1/di" border="0" ismap="true"></img></a></p><div class="feedflare"> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=dFboN64gBWs:QaVzcyFMYI8:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=yIl2AUoC8zA" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=dFboN64gBWs:QaVzcyFMYI8:F7zBnMyn0Lo"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=dFboN64gBWs:QaVzcyFMYI8:F7zBnMyn0Lo" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=dFboN64gBWs:QaVzcyFMYI8:V_sGLiPBpWU"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=dFboN64gBWs:QaVzcyFMYI8:V_sGLiPBpWU" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=dFboN64gBWs:QaVzcyFMYI8:qj6IDK7rITs"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=qj6IDK7rITs" border="0"></img></a> </div><img src="http://feeds.feedburner.com/~r/marketwatch/stockstowatch/~4/dFboN64gBWs" height="1" width="1"/>
Stocks to Watch: Stocks to watch Wednesday: Ralcorp, Deere
It?s a high-profile day for retailers as investors digest the corporate headlines for early Wednesday. <p><a href="http://feedads.g.doubleclick.net/~at/-ly7HEogmFPrqW1WHjv1QoP9Sks/0/da"><img src="http://feedads.g.doubleclick.net/~at/-ly7HEogmFPrqW1WHjv1QoP9Sks/0/di" border="0" ismap="true"></img></a><br/> <a href="http://feedads.g.doubleclick.net/~at/-ly7HEogmFPrqW1WHjv1QoP9Sks/1/da"><img src="http://feedads.g.doubleclick.net/~at/-ly7HEogmFPrqW1WHjv1QoP9Sks/1/di" border="0" ismap="true"></img></a></p><div class="feedflare"> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=lr2XqR9Tpqc:FW4i1Tr3dZg:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=yIl2AUoC8zA" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=lr2XqR9Tpqc:FW4i1Tr3dZg:F7zBnMyn0Lo"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=lr2XqR9Tpqc:FW4i1Tr3dZg:F7zBnMyn0Lo" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=lr2XqR9Tpqc:FW4i1Tr3dZg:V_sGLiPBpWU"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=lr2XqR9Tpqc:FW4i1Tr3dZg:V_sGLiPBpWU" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=lr2XqR9Tpqc:FW4i1Tr3dZg:qj6IDK7rITs"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=qj6IDK7rITs" border="0"></img></a> </div><img src="http://feeds.feedburner.com/~r/marketwatch/stockstowatch/~4/lr2XqR9Tpqc" height="1" width="1"/>
Stocks to Watch: Stocks to Watch Wednesday: Target, Deere
J.C. Penney Co., Target Corp., Deere & Co. and Staples Inc. are among the stocks that could see active trading on Wednesday. <p><a href="http://feedads.g.doubleclick.net/~at/a0SjHVM2upol15hd3-yLgfE1iQg/0/da"><img src="http://feedads.g.doubleclick.net/~at/a0SjHVM2upol15hd3-yLgfE1iQg/0/di" border="0" ismap="true"></img></a><br/> <a href="http://feedads.g.doubleclick.net/~at/a0SjHVM2upol15hd3-yLgfE1iQg/1/da"><img src="http://feedads.g.doubleclick.net/~at/a0SjHVM2upol15hd3-yLgfE1iQg/1/di" border="0" ismap="true"></img></a></p><div class="feedflare"> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=uzwF0KgR_z0:FWpnVQJcprI:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=yIl2AUoC8zA" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=uzwF0KgR_z0:FWpnVQJcprI:F7zBnMyn0Lo"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=uzwF0KgR_z0:FWpnVQJcprI:F7zBnMyn0Lo" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=uzwF0KgR_z0:FWpnVQJcprI:V_sGLiPBpWU"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=uzwF0KgR_z0:FWpnVQJcprI:V_sGLiPBpWU" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=uzwF0KgR_z0:FWpnVQJcprI:qj6IDK7rITs"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=qj6IDK7rITs" border="0"></img></a> </div><img src="http://feeds.feedburner.com/~r/marketwatch/stockstowatch/~4/uzwF0KgR_z0" height="1" width="1"/>
Stocks to Watch: Stocks to watch Tuesday: Groupon, Home Depot
Groupon Inc., Home Depot Inc. and TJX Cos. are among the stocks that could see active trading on Tuesday. <p><a href="http://feedads.g.doubleclick.net/~at/3VJRdifkERdPBc2ObTHZGHDTMj0/0/da"><img src="http://feedads.g.doubleclick.net/~at/3VJRdifkERdPBc2ObTHZGHDTMj0/0/di" border="0" ismap="true"></img></a><br/> <a href="http://feedads.g.doubleclick.net/~at/3VJRdifkERdPBc2ObTHZGHDTMj0/1/da"><img src="http://feedads.g.doubleclick.net/~at/3VJRdifkERdPBc2ObTHZGHDTMj0/1/di" border="0" ismap="true"></img></a></p><div class="feedflare"> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=db_XhkBDaH0:Lu30j_4eFWw:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=yIl2AUoC8zA" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=db_XhkBDaH0:Lu30j_4eFWw:F7zBnMyn0Lo"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=db_XhkBDaH0:Lu30j_4eFWw:F7zBnMyn0Lo" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=db_XhkBDaH0:Lu30j_4eFWw:V_sGLiPBpWU"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=db_XhkBDaH0:Lu30j_4eFWw:V_sGLiPBpWU" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=db_XhkBDaH0:Lu30j_4eFWw:qj6IDK7rITs"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=qj6IDK7rITs" border="0"></img></a> </div><img src="http://feeds.feedburner.com/~r/marketwatch/stockstowatch/~4/db_XhkBDaH0" height="1" width="1"/>
Stocks to Watch: Stocks to watch Monday: Avon, Chesapeake
Running down developments of interest to U.S. investors early Monday. <p><a href="http://feedads.g.doubleclick.net/~at/Yh51hGyQO73uNpnMtfkzMyNNoZY/0/da"><img src="http://feedads.g.doubleclick.net/~at/Yh51hGyQO73uNpnMtfkzMyNNoZY/0/di" border="0" ismap="true"></img></a><br/> <a href="http://feedads.g.doubleclick.net/~at/Yh51hGyQO73uNpnMtfkzMyNNoZY/1/da"><img src="http://feedads.g.doubleclick.net/~at/Yh51hGyQO73uNpnMtfkzMyNNoZY/1/di" border="0" ismap="true"></img></a></p><div class="feedflare"> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=-SR-60XfqQY:pO8sPC-zubg:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=yIl2AUoC8zA" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=-SR-60XfqQY:pO8sPC-zubg:F7zBnMyn0Lo"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=-SR-60XfqQY:pO8sPC-zubg:F7zBnMyn0Lo" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=-SR-60XfqQY:pO8sPC-zubg:V_sGLiPBpWU"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=-SR-60XfqQY:pO8sPC-zubg:V_sGLiPBpWU" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=-SR-60XfqQY:pO8sPC-zubg:qj6IDK7rITs"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=qj6IDK7rITs" border="0"></img></a> </div><img src="http://feeds.feedburner.com/~r/marketwatch/stockstowatch/~4/-SR-60XfqQY" height="1" width="1"/>
Stocks to Watch: Stocks to watch Monday: J.P. Morgan
J.P. Morgan Chase & Co., Arena Pharmaceuticals Inc. and InterOil Corp. are among the stocks that could see active trading on Monday. <p><a href="http://feedads.g.doubleclick.net/~at/ubC0zLonUX3fjD8AgxSJZIU78U4/0/da"><img src="http://feedads.g.doubleclick.net/~at/ubC0zLonUX3fjD8AgxSJZIU78U4/0/di" border="0" ismap="true"></img></a><br/> <a href="http://feedads.g.doubleclick.net/~at/ubC0zLonUX3fjD8AgxSJZIU78U4/1/da"><img src="http://feedads.g.doubleclick.net/~at/ubC0zLonUX3fjD8AgxSJZIU78U4/1/di" border="0" ismap="true"></img></a></p><div class="feedflare"> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=tl_OHl6nNQA:Zs0m34QyvvA:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=yIl2AUoC8zA" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=tl_OHl6nNQA:Zs0m34QyvvA:F7zBnMyn0Lo"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=tl_OHl6nNQA:Zs0m34QyvvA:F7zBnMyn0Lo" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=tl_OHl6nNQA:Zs0m34QyvvA:V_sGLiPBpWU"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=tl_OHl6nNQA:Zs0m34QyvvA:V_sGLiPBpWU" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=tl_OHl6nNQA:Zs0m34QyvvA:qj6IDK7rITs"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=qj6IDK7rITs" border="0"></img></a> </div><img src="http://feeds.feedburner.com/~r/marketwatch/stockstowatch/~4/tl_OHl6nNQA" height="1" width="1"/>
Stocks to Watch: Stocks to watch Friday: Arena, Nordstrom, Nvidia
Results reported by a pair of department-store retailers are likely to draw investors? scrutiny early Friday. <p><a href="http://feedads.g.doubleclick.net/~at/U_9-Ru626vUmKVT2JaCHYtR8Uvo/0/da"><img src="http://feedads.g.doubleclick.net/~at/U_9-Ru626vUmKVT2JaCHYtR8Uvo/0/di" border="0" ismap="true"></img></a><br/> <a href="http://feedads.g.doubleclick.net/~at/U_9-Ru626vUmKVT2JaCHYtR8Uvo/1/da"><img src="http://feedads.g.doubleclick.net/~at/U_9-Ru626vUmKVT2JaCHYtR8Uvo/1/di" border="0" ismap="true"></img></a></p><div class="feedflare"> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=QaeNvKqRZiA:nN6BplAQw18:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=yIl2AUoC8zA" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=QaeNvKqRZiA:nN6BplAQw18:F7zBnMyn0Lo"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=QaeNvKqRZiA:nN6BplAQw18:F7zBnMyn0Lo" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=QaeNvKqRZiA:nN6BplAQw18:V_sGLiPBpWU"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?i=QaeNvKqRZiA:nN6BplAQw18:V_sGLiPBpWU" border="0"></img></a> <a href="http://feeds.marketwatch.com/~ff/marketwatch/stockstowatch?a=QaeNvKqRZiA:nN6BplAQw18:qj6IDK7rITs"><img src="http://feeds.feedburner.com/~ff/marketwatch/stockstowatch?d=qj6IDK7rITs" border="0"></img></a> </div><img src="http://feeds.feedburner.com/~r/marketwatch/stockstowatch/~4/QaeNvKqRZiA" height="1" width="1"/>

is current assets minus current liabilities. These assets are near to cash or will generally be turned over in one year: receivables, inventory and the like. To measure the health of working capital, divide current assets by current liabilities to get the "current ratio." A current ratio of two to one or better usually indicates a solid company. As long as the company does not have any long term debt, or at least none coming due in the near future, the company is solvent and should be around for a while - little or no bankruptcy risk.

Next, we look for low price-earnings (P/E) ratios. In my opinion, buying high P/E to chase growth companies is inviting real risk. If the company disappoints in earnings, not only will the stock drop from lower earnings, the P/E ratio will deflate as well, giving you a double hit.

OK, so you have found a company that is selling at or below book value with a current ratio better than 2:1, and a low, low P/E. It may be that the stock will not go down, but will that stock go up?

Picking growing industries and growth companies is more than I can tell you here, but there are two simple things you can look for first: See if the company is doing a stock buy-back about this price. See if the insiders are making large insider purchases? Next, you can look at the ratio of revenues or sales to market values or the dollar amount of sales per share. Generally speaking, the company with a relatively high amount of sales per market value or sales will have more action on the upside. That company has more revenues to make profits from. After you have narrowed the field using the above techniques, there will be no substitute for intense homework about company prospects to find which of those cheap that truly give you superior returns, what I call my "Home Run Stocks."

As I write this, the market is down sharply over the last few months. This is a good time to go bargain hunting using my techniques.
John Lux is a former OTC Trader, investment banker and author of the book, "How to Find a Home Run Stock." To read the book and find your own Home Run Stocks, go to => www.asklux.com/home-run-stock.htm You can email John at lux.investor @ gmail.com