Meridian Star


October 27, 2013

How to choose stocks wisely

MERIDIAN —     Probably the best known phrase in the stock market is "buy low and sell high." But how do you know which stocks are worth buying and for what price?

    In his new book, “Choose Stocks Wisely: A Formula That Produced Amazing Returns,” Dr. Paul W. Allen, a CPA and Professor Emeritus from Mississippi State University-Meridian, shares his investing strategy that enabled him to take $50,000 in 2003 and grow it to over $1.3 million by 2013.  

     “I felt like I had something to share that’s not commonly practiced in the stock market by investors. As a Christian, I believe in managing resources wisely,” Allen said. “And there is a lot out there about stewardship and managing personal finances like budgeting or getting out of debt, but very  little about investing wisely.      "Buying quality companies that are trading at bargain prices is sensible.  They say buy low and sell high but I think it’s more important to buy low and if I’m always buying low – a good company at a low price - then probability is strong that I’m going to sell higher than I bought.  If I consistently sell higher than I bought then I’m going to consistently come out ahead.”

    Allen began his professional career in 1981 after he received a bachelor’s degree in professional accountancy (BPA) from Mississippi State University. He has an MBA and also a doctorate in accounting and is also a CPA. But his love of teaching is what motivates him most. Although he officially retired from MSU-Meridian in June 2010 after 25 years teaching accounting as well as some finance courses, he can still be found in the classroom teaching one or two accounting courses each semester.

    “It is an awesome privilege to teach,” Allen said. “It is so satisfying to see students work hard and achieve their career goals. I want to motivate the students toward being excited about learning accounting – I hope I do that … I know they always motivate me to want to do better.”

    Even before his retirement, he began thinking about writing a book detailing how to use the corporate balance sheet to find solid companies trading at bargain prices. For many years his students had also encouraged him to write down what he had been sharing with them in the financial accounting classes he taught at MSU-Meridian.

     “The concepts behind my successful buying strategy, which I communicate in my book, are based on the principles I’ve shared in my financial accounting classes. A person doesn’t have to be an accounting major or an accountant to be able to understand my strategy,” Allen said. “It is really quite straightforward. When choosing which companies to invest in I use the information that is on a company’s balance sheet. The market, by and large, does not focus on the balance sheet information to assess the value of a company – it uses information from the income statement – it focuses on short-term profits.

    "Yet when someone buys a share of stock – they are buying a share of that company’s equity and equity is found on only one financial statement and that’s the balance sheet. So then if I can understand how to read a balance sheet – to know how liquid a company is (able to pay their bills) and how much debt they have, then I’ll know which ones (companies) I want to invest in and at what price per share  – something the income statement can’t tell me.”

    Allen will host a book signing in the lobby of MSU-Meridian’s Downtown Campus on Tuesday, Oct. 29 from 5-6:30 p.m. Copies of his book may be purchased for $14.99 through Amazon. You can visit his website, and click on “Order Today” and you will find a link to direct you to his book on Amazon. Copies of the book will also be available at the book signing. (cash or check only)

    He also plans to offer a 2-3 hour seminar to the general public on the principles of his book before the end of the year (date to be announced) and he will be teaching a class, Financial Statement Analysis, in January 2014 at MSU-Meridian’s Downtown Campus. The class will be held on Monday nights using the book as a text.

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