Updated from 7:07 a.m. EDT
By Stockpickr Guest Columnist Doug Hall
Stock selection requires an investor to consider quantitative and qualitative factors. That is, you analyze a company's numbers, and then you interpret what those numbers and other pertinent information mean for the stock.
Take steel companies, for example.
Investors have been pummeled for the last two months as stocks for
AK Steel Holding
Reliance Steel & Aluminum
have dropped almost 50% since their peaks in midsummer. These companies aren't serving identical markets, but all produce steel -- some from scrap, some from ore. Their futures are closely tied together.
Consider that all of these companies have reported annual growth ranging from 14% to 48% over the last five years. But selling for seven to 11.5 times trailing earnings, their current prices reflect growth rates of 1% to 5%. That just doesn't seem right.
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