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The Essential P/E: Understanding the stock market through the price-earnings ratio by Keith Anderson

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Chapter 17. Joseph Piotroski: The P/E and the Fscore

In 2000 Joseph Piotroski was an associate professor of accounting at the University of Chicago. He noticed that the market-beating performance of value stocks, in particular companies selling at a low price-to-tangible book value (PTBV), depended on a minority of cheap companies that performed very strongly outweighing the weaker performance of the majority. He found that, after two years, only 44% of low PTBV companies beat the stock market average, although the group as a whole did.

One of the reasons why professional financial analysts rarely recommend the cheapest stocks even though, statistically speaking, they do well, may be this brutal reality: the chances of an individual value ...

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