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Suggestions for Building a Portfolio

You can use the Value Line portfolio that seems to be most aimed at achieving your own objectives. Or you can select individual stocks from the Value Line Ranking service to add to your holdings.

It is important to remember that if you are picking and choosing among stocks in the different lists, you always maintain a diversified portfolio. So, as you buy new stocks, choose them with an eye to how they will complement those you already own.

We recommend that you own at least six stocks in six different and diverse industries and pick from stocks ranked 1 and 2 for Timeliness in the highest ranked industries. You should also try to have stocks with Safety and Technical ranks of 3 or better.

The Value Line approach to building a strong and diversified portfolio that is likely to outperform the market is to select timely stocks in timely industries—that means stocks ranked 1 or 2 for Timeliness in relation to the universe of stocks that Value Line tracks and industries ranked in the top third of all those followed by Value Line.

A good way to start is to turn to the section call Timely Stocks in Timely Industries, usually found on page 25 of the Summary & Index. In addition, you should use a range of other information provided on the Value Line page to help you select from among the stocks ranked 1 and 2 in their specific industries, concentrating on those industries in the top third of the Timeliness ranks.

Another approach is to use the many stock screens (stocks listed according to various criteria) in the second half of the Summary & Index to search for interesting candidates for your portfolio.

Suggestions for Building a Portfolio

Building Your Portfolio Maintaining your Portfolio
What Value Line Does What You Do  
By Industry – Timeliness

Value Line ranks industries in order of their Timeliness (relative price performance in the next 12 months).

Read the latest Value Line reports on the top-ranked industries. Select at least six industries rated highest for Timeliness.

By Stock – Timeliness

Value Line ranks approximately 1,700 stocks in five categories according to their Timeliness. The top 100 stocks are ranked 1 (Highest) for expected relative performance over the next 12 months; 300 are ranked 2 (Above Average); about 900 are ranked 3 (Average); 300, 4 (Below Average); and 100, 5 (lowest).

Make up a list of those stocks included in your six or more most timely industries that are also ranked 1 (Highest) or 2 (Above Average) for relative price performance in the next 12 months.

When and if a stock in your portfolio is found to be no longer a timely investment – that is to say, it has fallen to a rank 4 or 5 for Timeliness – make that stock a candidate for sale.

By Stock – Safety

Value Line also ranks approximately 1,700 stocks according to their Safety in five categories with 1 (Highest) expected to be least volatile and financially most strong, and 5 (Lowest) most volatile and least strong financially.

Eliminate from your list of Timely Stocks in Timely Industries those that fall short of your Safety standard.

These Safety ranks are significant and should not be ignored.

By Stock – Technical

Value Line also ranks approximately 1,700 stocks according to their expected price performance relative to the overall market in the next three to six months, based on complex analysis of the stock's relative during the prior 52 weeks. Unlike the Timeliness Rank, earnings are not a factor in the Technical Rank.

Particularly if you are a short term investor, you should look at the Technical Ranks and try to limit purchases to stocks with Technical ranks of 1 or 2. Under no circumstances, however, should the Technical Rank replace the Timeliness Rank, which has a superior record over the years.

By Stock – Income

Value Line estimates the next 12 months dividend yield of each stock at its most recent price. The expected yield is updated in the weekly Summary & Index. Value Line also shows for comparative purposes, the median yield of all dividend-paying stocks.

Eliminate from your list of Timely Stocks in Timely Industries those that fall short of your current-income standard. For example, if your yield standard is 3%, you may want to eliminate stocks that yield less than 3%.

When a stock is sold, replace it with another stock ranked 1 or 2 for Timeliness that also meets your standards for Safety and current income. It would be best in the long run to maintain diversification through six or more stocks in at least six different industries.

Value Line Reports

Value Line reports on each stock and each industry once every three months, on a preset schedule, in the Ratings & Reports section. The page numbers on which reports appear are shown in the weekly Summary & Index. When new information requires, a "Supplementary Report" is issued as often as weekly in the final pages of the Ratings & Reports section and online on the day it is written.

Read the latest Value Line reports on the industry groups and stocks that have qualified according to all of your standards.

Make your final selection of six or more stocks from the list that has been refined through the above procedures.

Read these report pages regularly to ensure that the stocks you own or are interested in meet your criteria.

Selection & Opinion

Value Line's Selection & Opinion section provides a current appraisal of the economy and the stock market. It recommends how much of one's capital should be invested in common stocks and how much should be set aside temporarily in cash reserves.

Read Value Line's Selection & Opinion each week. Also, go to the Value Line web site for our latest Daily Commentary.

When the Value Line service in its Selection & Opinion section recommends building cash reserves because the general market seems temporarily to be too high, sell stocks and invest instead in short-term government bonds or other safe instruments. In selling, dispose of stocks ranked 5, 4 or 3 for Timeliness, in that order.

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