The Value Line Investment Survey

Have you ever opened the statement that your mutual fund company sent to you, then looked at the returns and thought, "I could do better than that"?

It's an increasingly common feeling, as the returns generated by many equity mutual funds often leave investors frustrated. If you want to try your hand at picking stocks but don't know where to start, the Value Line Investment Survey can help.

The Value Line Investment Survey

The Value Line Investment Survey consists of professional research and recommendations on approximately 1,700 stocks. According to Value Line, this represents "approximately 90% of the trading volume of all stocks traded in U.S. markets."

The Survey is available on a subscription basis, with weekly updates on the financial markets, recommended portfolios, developments involving covered securities, and special topical reports. Value Line also offers separate reports on different equity categories, as well as funds and options. For would-be stock pickers, Value Line provides an easy way to start your research.

How to Get Started

Bearing in mind that conducting your own stock research is a time-consuming task, the first step in getting familiar with the tools Value Line offers is to set aside a few hours of reading time. You will need to study the materials closely in order to understand how to use them before you will be ready to invest any cash.

Prior to delving into the literally thousands of pages of stock research at your fingertips, start by reviewing "The Complete Guide to Using The Value Line Investment Survey." In roughly 40 pages, this slim volume explains Value Line's ranking system (stocks are rated from one to five in a variety of categories) provides line-by-line explanations for the information provided in each of the research reports. At the back of the booklet is a detailed glossary of investment terms that includes definitions for terms ranging from bond ratings to unit labor costs.

Next, you'll want to read, "A Quick Study Guide." This guide explains the information included in the two binders that serve as primary research tools for investors using the hard copy version of Value Line. (An online service is also available.) The first binder contains the "Summary and Index" and "Ratings and Reports." The second binder contains "Selection and Opinion." The Quick Study Guide also explains how to use the research to choose stocks for your portfolio.

Binder 1: Summary and Index

Summary and Index

Starting with the first binder, the Summary and Index provide an overview of the stock screens Value Line provides, including lists of stocks with the lowest price-to-earnings ratio, the highest dividend yields, the highest annual total revenues, and a host of other choices. These screens help investors identify stocks that align well with their personal investment goals. For example, investors seeking income may look for stocks that offer high dividend payments, while investors seeking growth may seek stocks that have the highest appreciation potential.

If this is your first effort at picking stocks, this portion of the Survey could be of particular interest to you. In addition, the Summary and Index catalogs all of the covered stocks and provides the page number where the research reports can be found.

It also provides key statistics for the universe of covered stocks, including price-to-earnings ratio, dividend yields, and appreciation potential. These statistics provide information about the "universe" and the direction it has been moving in, as well as providing a baseline for comparing an individual stock against the universe.

Ratings and Reports

The Ratings and Reports section provides stock research on approximately 1,700 companies. The research includes an analysts' report that provides a brief overview of the company, a review of its financial health, and a recommendation regarding its attractiveness to investors.

The data portion of the report provides a detailed statistical analysis, including a price target, transactions by company officials (buying/selling), transactions by institutions, a chart of historical returns, sales figures, earnings data, and much more. Perhaps the best thing about the research section, particularly if you are a novice, is its ranking system.

Rankings

Every stock in the survey is ranked on a scale of one to five in three different areas: timeliness, safety, and technical. A rank of one denotes stocks that are expected to outperform the rest of the Value Line universe. Timeliness refers to performance expectations for the next six to 12 months. Safety compares the security's price stability against its peers, and the Technical ranking compares 10 price trends to provide price return potential for a three to six-month period. An alphabetical listing of all covered stocks, including key statistics and the ranking numbers, is particularly convenient for investors seeking a specific rating in one or more categories.

Binder 2: Weekly Selection and Opinion

The second binder contains the Weekly Selection and Opinion section, which includes an economic outlook, market commentary, and research on selected topics. Additionally, it includes evaluations of four model portfolios, one targeting short-term growth, one for long-term growth, one for income, and lastly, one for both growth and income. The evaluations highlight both successful selections and failures, which serves as an important reminder.

While the Value Line Investment Survey is a convenient, easy-to-use tool that is particularly helpful to novice investors, investing is not an endeavor that comes with any guarantees. The information you read in the Survey is well researched and impressively packaged, but there is no guarantee that it is correct. Like any other stock research, the insight provided by Value Line does not mean that you can't lose money on an investment that you make using the research. As with all security purchases, let the buyer beware.

Using the Data

Taken as a whole, the Value Line Investment Survey provides all the tools an investor needs to develop a picture of the current economic landscape, learn about stock analysis and identify securities that are appropriate for a variety of investment objectives. By matching the results of the research with your personal investment needs, you should be able to put together enough information to choose a stock or build an entire portfolio.

How to Get the Survey

The Value Line Investment Survey is available by subscription. A one-year subscription is just over just under $600 for the print or digital version. For an additional fee, the firm also offers research on mutual funds, exchange traded funds, convertible securities, and more.

Interestingly, many large libraries receive the print version of the Value Line Investment Survey and provide it to patrons for free. This provides an opportunity to learn about, use, and thoroughly evaluate the materials before plunking down the cash for a personal subscription conveniently delivered to your house.

Next Steps

The Value Line Investment Survey is not the only professional research that you can easily access. In fact, it is just the first in a long list of tools. After you have read, researched, and mastered the Value Line toolset, you can expand your repertoire of investment tools by using the research reports provided through websites associated with online brokerage accounts. These sites provide access to research reports similar to those offered by Value Line. It is worth noting that reports from various research providers often contradict each other.

The Value Line Composite Index

The Value Line Composite Index is a stock index comprising all 1,700 companies included in the Value Line Investment Survey.

The index actually tracks two averages. The Value Line Composite Geometric Index is the original index, launched in 1961. It tracks the geometric mean of the survey's stocks, based on the proportional gain between closing prices and the total number of stocks.

The second version, launched in 1988, is the Value Line Arithmetic Index. This tracks the daily changes of a portfolio containing equal numbers of all of the stocks listed in the survey.

The Bottom Line

While these contradictions may be frustrating, think of research as data gathering. You can take in data from as many sources as possible and use that data to formulate your own opinion. Relying on any single source of data is unlikely to be a wise decision, as there are no guarantees that the researchers behind your data source will always make the right call. Of course, if reading these research reports is too time-consuming, too scary, or too frustrating, you can always buy a mutual fund or hire a professional financial advisor to provide investment recommendations.