Hey folks, I've recently started looking at forward P/E to gauge good entry points for stocks with good fundamentals. My theory here is that the raw forward P/E is not as important and instead we should more focus on the stock's relative forward P/E. In other words, how does the stock's current Forward P/E compare to its past performance?
I've only started looking into this as a method to invest and have identified a handful of stocks that have good fundamentals and have experienced a pullback that pulls their 60 days forward P/E Z-score below -2; my strategy would be to buy when the z-score starts crossing up over -2 and to prevent multiple entries/exits I tend to use the EMA9 of the raw z-score. Looking at various stocks, this method seems to produce excellent returns over a year.
In recent weeks I bought RBC and YOU based on this and currently have the following stocks on my watchlist as my filter indicates they have good fundamentals (according to my filter).
TXN, TJX, CRU, AS, HEI, CW, HWM, CDNS
Anyways, wondering if anyone has used anything similar to this system or had any thoughts related to it.