Strong Buy The stock is trading at 25% of what I estimate to be fair value. Sometimes, a stock that I rate a “Standard Buy” (see below) will face such extremely difficult business and/or market conditions that the price of the stock will continue to drop past 50% of fair value all the way to 25% of fair value. At this point, it’s time to buy more because the stock has become an extreme bargain and therefore offers more upside when business and/or market conditions improve.
Standard Buy The stock is trading at less than half its fair value. You should buy it at a price less than what I have indicated to be the “buy price”.
Weak Buy The price has risen to more than half of fair value but is still less than 2/3 of fair value. It’s still a bargain, but offers less upside than a standard buy.
Hold The price has risen to more than 2/3 of fair value. It’s worth holding if you bought it at the buy price, but doesn’t offer enough upside to warrant buying it if you don’t already have it. A stock that has had negative developments (such as insider selling or a recent financial loss that made its debt/equity ratio more than 1) may also be rated a hold.
Weak Sell The price has risen to fair value. For the Sell-at-Target-Price Portfolio, it’s time to sell and use the proceeds to buy another out-of-favor stock. For the Minimum-Turnover Portfolio, it’s time to sell half. The other half should be held until its secondary target price is reached. A stock that has had negative developments (such as insider selling or a recent financial loss that made its debt/equity ratio more than 1.5) may also be rated a Weak Sell.
Reduce Sometimes negative developments can cast doubt on a company’s prospects or viability. Heavy insider selling, declining sales and increasing debt are danger signs that investors do not want to ignore.
Strong Sell The price has risen to relatively high valuations. It’s time to sell and use the proceeds to buy another out-of-favor stock. A stock that has had negative developments (such as insider selling or a recent financial loss that made its debt/equity ratio more than 1.5) may also be rated a Strong Sell.
