Value investors look for beaten down stocks likely to recover when the economy picks up, and that brings Joseph Piotroski to mind.  Piotroski, an accounting professor at the University of Chicago, devised a nine-step method for finding the best value candidates. The system rates stocks on financial strength and profitability. Piotroski reasoned that value-priced (low price/book ratio) stocks rating high in these categories would be the best performers.  He was right! Piotroski found that value stocks receiving passing grades using his system outperformed a portfolio of all value-priced stocks by an impressive 7.5 percent annually. Piotroski’s scoring system is effective and easy to use, but you still have to do your due diligence.

Read more.…