Category Archives: Stocks

Stocks Lesson 14

Guru Investing. Google “stock guru” and see how many different guru strategies you can come up with.

VALIDEA Guru Screener – Interesting in that it has a lot of gurus. Plenty of room for research.

Stocks Lesson 13

Opinion. It’s everywhere. Here are a few places to think about.

Yahoo Finance – You are looking for the analyst opinions on this example page.

Barchart – This is an example opinion page.

Zacks – This is the ratings page and this is the opinion page.

Stockopedia – Worth a look?

gurufocus – They have a very annoying NAG SCREEN. If you give them your email will it stop?

Marketwatch – This is the opinions page.

NASDAQ – Interesting perspective on ratings. The screener is here.

IBD – Not much use without a $30 month subscription. They do have paper copy.

Stocks Lesson 11

Valuation Ratios – There are some articles that simply talk about the application of several valuation ratios without being specifically about any one. Some of the articles are here, here, here, here, here, here, and here.

Academic References – There are also some academic articles that look at stock valuation models. References are here, here, here, and here.

P/E – Price / Earnings – It’s a number. The lower, the better, as long as other factors are acceptable. Some articles are here, here, here, and here.

ROE – Return on Equity – It’s  a percentage. Look for a percentage in the teens and pray for a percentage in the 20′s. Articles are here, here, here, here, and here.

ROIC – Return On Invested Capital – Articles can be read here, here, here, and here.

ROC – Return on Capital – Articles are here, here, and here.

DCF – Discounted Cash Flow -

PVGO – Present Value of Growth Opportunities.

Stocks Lesson 10

EPS Example

EPS Example

EPS – Earnings Per Share. This is a critical number. Actually, the P/E ratio is the critical number. Growth stocks start to get higher and higher P/E ratios. I was doing some coding this morning and a was doing some checking and I ran across an interesting chart. This is a chart of ALGN from ZACKs with EPS on the left axis and price on the right axis. Notice how EPS and price tend to move together until about 1/3 of the way through 2017 when price seems to leave EPS in the dust. I think that is a very important point in the stock’s price development. You can also find some good data on EPS when looking at the EPS page from Zacks for a particular stock.

Stocks Lesson 7

This is some more stuff on Value Investing. It may be the shortest Lesson I will ever do. In this lesson I suggest that you go to the youtube channel for the website and  watch the videos for Course 1: Stock Investing Like Warren Buffett – Beginners, Course 2: Stock Investing Like Warren Buffett – Intermediate and Course 3: Stock Investing Like Warren Buffett – Advanced. It will take some time to do this (weeks if you do it part-time). But, I think it’s worth it.

Now, once you’ve covered those videos you’ll probably want to get 10 years worth of historical data for a select number of stocks. This is to satisfy the consistency requirement that goes into the calculations of a stock’s intrinsic value. Where can you get such information? Try here and here and here. Gurufocus has some great stuff but the best stuff costs. You also might want to do a Google search for SMF Excel Plug-in.

Stocks Lesson 6

Screeners – They are the simplest way to start a search for stocks. However, you need a starting point and that starting point should be some general criteria. Rule: Stocks follow the market. When the market goes down really dramatically, it takes all stocks with it. Often, it can take industry groups with it. An industry group is a collection of stocks that are in a certain industry. An industry group classification is good in that, for a given period of time, one industry group will outperform all others in terms of price increases. Also, there will be a leader in a particular industry group for price performance in a given period of time. Note that one of the most critical phrases in all of investment is “performance over a given period of time” or its equivalent. Note that there are as many industry groups as people who create them. I like to use MIGs – Morningstar Industry Groups. As an example, All major indexes – SPY, NDX & DJ-30 are down for the last 5 days but 55 of the 238 MIGs (2561 of 8269 stocks) are still in positive territory, giving a little hope to a downtrending market.

Screeners allow you too start a search for stocks you like based on criteria. You want stocks that perform well but what time period do you use? There is no one right answer for that question. The vast majority of today’s best performing 100 stocks for the past year did not exist in the year of my birth and are anything but household names. How do you find those babies?

You start with a screener and some criteria. I’m going to use Zack’s screener. During this lesson I’m going to keep track of some of the peculiarities of their screener, just to show what they are. You’ll need to understand them to help you with the screener.

  • The market cap is in millions.
  • Volume is given in hundreds. Screen for daily volume of at least 250K.

Stocks Lesson 5

I’m writing this as I’m reading about Value Investing which is one strategy for picking stocks. If you want to learn more about the concept of Value Investing you should look here and here and here. The following are key ratios to look at in Value Investing. Look for consistency.

Gross Profit Margin – the more the better. Think 40% or better.

EBITDA – Don’t use it as it ignores some very important real expenses.

Interest Expense – Better off not to have any. The less the better otherwise.

Earnings – use pre-tax earnings.

Taxes Paid – make sure they make sense.

Net Earnings – are they trending upward? What percentage of total revenue is net earnings? Look for 20% or more.

Net Earnings per Share – Good way to compare apples-to-apples. Look for consistency and growth. High volatility would be bad.

Cash & Marketable Securities – a very good thing to have.

Current Ratio – Above 1 is good and below 1 is not so good.

Long Term Debt – the less the better.

Also to consider:

SGA – Selling, General and Administrative costs.

Administrative Costs – less is better.

Research Costs – Less is better. Generally.

Cost of Debt – Bad. Very bad.