I conducted a short interview with my financial adviser (Frugal Son) via chat.
Me: What are your favorite finance books?
Son: So far my favorite has probably been Bogleheads. I'm also reading a book right now called Warren Buffet and the Interpretation of Financial Statements, which is shaping up to be pretty good. And the way I choose my stocks is, so far, very simple, but will hopefully get a little more involved once I'm finished reading this book.
Right now, I look for a P/E ratio that is not too much higher than 15 an consistent, positive EPS. I like dividend paying stocks, so I look for companies that have a history of paying dividends even in down economies. I also like stocks that have a price-to-book ratio of near or below 1 (ideally).
Me: So it's not brain surgery.
Son: Nope. That's about it. This latest book is teaching me how to look at underlying financials to get a better idea of the financial state of the company like about debt ratios etc., but the price-to-book ratio below 1 is nice because theoretically (emphasis on theoretically) that means that even if the company goes bankrupt you won't lose money theoretically.
I am amazed.
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