Value Line
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Value Line, Inc.(NASDAQ: VALU), is a New York corporation founded in 1931 by Arnold Bernhard, best known for publishing the The Value Line Investment Survey , a stock analysis newsletter that's updated weekly and kept by subscribers in a large black or green binder. The survey itself is broken into three parts; Ratings & Reports, Table of Summary & Index Contents, and Selection & Opinion.
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[edit] Company background
Value Line, in its current form, was incorporated in 1982 and is the successor to substantially all of the operations of Arnold Bernhard & Co., Inc. In June 2005, AB & Co. owned approximately 86.5% of the Company’s issued and outstanding common stock.
The Company's periodical investment publications are produced through its wholly owned subsidiary, Value Line Publishing, Inc. The publications provide investment advisory services to mutual funds, institutions, and individuals. VLP publishes in both print and electronic formats
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- The Value Line Investment Survey
- The Value Line Investment Survey - Small and Mid-Cap Edition,
- The Value Line 600,
- Value Line Select (more in-depth coverage of one stock per month)
- The Value Line Mutual Fund Survey
- The Value Line No-Load Fund Advisor
- The Value Line Special Situations Service (for speculators)
- The Value Line Options Survey and The Value Line Convertibles Survey
VLP also provides current and historical financial databases DataFile, Estimates & Projections, Convertibles, Mutual Funds and other services (in standard computer formats) and markets investment analysis software:
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- The Value Line Investment Analyzer
- Value Line ETF Survey
- Mutual Fund Survey for Windows
- Value Line Daily Options Survey
- Value Line Electronic Convertibles
- Value Line Research Center
The Company is the investment adviser for the Value Line Family of Mutual Funds, which on April 30, 2005, include 14 open-end investment companies with various investment objectives. In addition, the Company manages investments for private and institutional clients. The Company is registered with the Securities and Exchange Commission as an Investment Adviser under the Investment Advisers Act of 1940.
In addition to VLP, the Company's other wholly owned subsidiaries include a registered broker-dealer, Value Line Securities, Inc., and an advertising agency, Vanderbilt Advertising Agency, Inc. These subsidiaries primarily provide services used by the Company in its investment management and publishing businesses. Compupower Corporation, another subsidiary, serves the subscription fulfillment needs of the Company's publishing operations. Value Line Distribution Center, Inc. handles all of the mailings of the publications to the Company’s subscribers. Additionally, VLDC provides office space for Compupower
In 1965, Value Line introduced a mathematical formula, called the Timeliness Ranking System, that serves as the basis for its survey picks. The company also manages a series of mutual funds, again based on the firm's Timeliness Ranking System, and produces several other publications, both print and electronic.
Arnold Bernhard (b Dec 2 1901 - Dec 22, 1987, Westport, CT), the son of European immigrants, took an unusual path to success in the stock-picking world. After graduating with honors from Williams College, Bernhard wrote several plays and theater reviews for the New York Post and Time. His interest piqued by Edwin Lefèvre's book Reminiscences of a Stock Operator, Bernhard broke into the investment management business, first as an analyst with Moody's Investor Service and later as an account executive managing investments. The Wall Street Crash of 1929 led to his lay off from Moody's, but he retained some of his clients. Bernhard then began to develop his statistical method for picking stocks, and soon began publishing his investment survey. He continued to expand the business, adding the other publications and mutual funds along the way. In May 1983, Value Line sold stock for the public for the first time (NASDAQ: VALU), though the Bernhard family retained 80% control. Bernhard died in December 1987, and his daughter, Jean Bernhard Buttner was named CEO of Value Line shortly thereafter.
[edit] Ratings and Reports
The Ratings & Reports section contains one-page reports on approximately 1,700 companies and more than 90 industries. Each company report contains, among other things, Value Line's Timeliness, Safety, and Technical rankings, Beta calculations, a 10-year statistical history of 23 financial ratios and other indicators of corporate performance, financial and stock price forecasts for the coming 3 to 5 years, and an analyst's written commentary.
[edit] Value Line Safety
In the Value Line Report the term Safety is used as a proxy for risk. Stocks are rated on a scale of 1 to 5 with 1 representing those securities that are financially strong and therefore less volatile. Investors should evaluate their own personal risk tolerance profile and choose stocks with a Value Line Safety rating that aligns with their comfort zone.
The lower the Safety score, the greater the short-term price movements the stock will experience. If short term price swings will make you nervous - perhaps to the point where you're selling a stock prematurely - then it's best to pick a stock with a Safety score of 1 or 2.
[edit] Value Line Technical
Value Line's Technical rating is very similar to its Timeliness rating with one important difference. The Technical rating does not consider earnings per share projections - only the opportunity for a stock's price appreciation. Value Line encourages investors seeking short-term capital gains - in the three to six month time frame - to purchase stocks with Technical ratings of either 1 or 2.
[edit] Value Line Beta
A stock's beta is a measure of a particular stock's price volatility relative to a broader measure of stock price movements such as a market index. Many stock beta calculations are performed relative to the S&P 500 however; the Value Line Beta calculation uses the New York Stock Exchange Composite Index.
In fact, Value Line's Beta values are derived using the movement of the stock's price each week relative to the movement of the NYSE Composite. Value Line uses five years worth of weekly data - over 250 data comparisons - to derive their beta values.
The most important thing to remember about beta is that it is a measure of a stock's volatility or price movement. A stock with a beta above 1.0 will experience more price movements (both up and down) than the comparative index while a stock with a beta of less than 1.0 will experience smaller price fluctuations.
[edit] Other Report Information
There are two other relatively important pieces of information in the Value Line Report and just how important that information is to the investor really depends on their investment strategy.
[edit] Investing for Price Appreciation
Investors looking for long or short term capital gains should focus on the stock's future price projections. These price projections can be found immediately below the advice box in the upper left hand corner of the report. There you will find not only price projections but also expected gains and total annual returns.
[edit] Investing for Income
If you're looking for stocks that will provide a consistent source of income then you'll want to take a closer look at dividend paying stocks. You can find this information on the Value Line report on the top line of the report. The value you'll want to look for is labeled as the dividend yield.
Generally investors looking for a steady source of income will want to buy stocks with a dividend yield that is 3% or higher. Dividend yield should be used as a secondary filter, meaning the investor should first look for top Timeliness scores then dividend yield.
[edit] Summary & Index
Summary & Index contains an index of all stocks in the publication as well as many up-to-date statistics to keep investors informed about the latest company results.
[edit] Selection & Opinion
Selection & Opinion section contains Value Line's latest economic and stock market forecasts, one-page write-ups of interesting and attractive stocks, model portfolios, and financial and stock market statistics.
