Check Your Emotions

I am going to continue looking at stocks produced by a mechanical-value investing system. I'm fascinated by this approach and plan to dedicate more research and effort to it. It removes emotions and second-guessing from the process, and the early results are promising. My programming and data skills are sadly lacking but I believe I can torture the data long enough to see how well this works over time. As a bonus, this approach helps identify cheap stocks I might have otherwise overlooked.

One of the benefits of a mechanical system is that it overrides the human element and buys stocks I would have avoided. This is certainly the case with shares of Career Education (CECO). Although I never shorted this particular stock, I have been betting against the education stocks for about three years and I am still not excited about the industry. But this stock is super cheap at 30% of tangible book value and management is attempting to right the ship amid the storm. The company is closing campuses and cutting jobs, which should save about $50 million a year. That is about a third of what it lost last year, so the business will have to get better for the stock to recover. The for-profit education business in the U.S. will continue to decline but this company is seeing growth in its international schools. The system doesn't address profit or potential, yet the stock qualifies -- so into the portfolio it goes....431 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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