Expert: Steve Hach - 3/26/2008

Question
I am a value investor.  My level of investment knowledge is MBA finance and Investments graduate. I have reads books such as Scott Hoovers, Stock Valuation, so please DO NOT respond with a bashful explanation in your attempt to explain methodology.  I truly am infatuated with the investment world. I have been searching for a sound valuation strategy that has historical evidence of success. I cannot determine the best strategy for stock valuation. I have tried for the last six years of my life. I attempted, in my graduate studies, to create a sound valuation model, but I have a weak conclusion. Which stock valuation strategy do you suggest and why? I know that is a loaded question, but in a normal stock valuation case, for example the valuation of GE, what method do you use?

Thanks


Answer
Tom,

I work at a quant shop with a valuation model.

The theory behind the model is found here:

Stock Valuation in Dynamic Economies, Bakshi, Chen, 2001.
A Generalized Earnings-Based Stock Valuation Model, Dong, Hirshleifer, 2004.
Stock Valuation and Investment Strategies, Chen, Dong, 2001.
Investing With a Stock Valuation Model, Chang, Chen and Dong, 1999.

These papers can be downloaded here:

http://www.valuengine.com/pub/main?p=32

Best,

Steve