Picking Winners
06-01-2007, 12:33 PM
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Picking Winners
Picking winners is more than just buying someone's picks. You can find hidden gems long before others do by doing some research. Here are a few tips to keep in mind as you scan the horizon for the next winners.
Conference Calls
Conference calls are a great source of information, not just about the company holding it but also about the sector and industry they are in. I recommend you pick the "alpha" stock in each sector and schedule your calendar to listen in (doesn't even need to be live) to what they say they see going forward.
For example, you might want to listen to the XOM call to gauge the pulse of the oil industry. How has the market changed and what are they doing to compensate for those changes? Such tidbits will lead you to look at other companies who stand to benefit. Is there a shortage of rigs available for drilling? Take a look at the drillers. Are they needing to update or expand their capacity? Look at oil services.
PEG ratio
The PEG ratio is the PE ratio/earnings growth. Most financial sites have this information. You will find the greatest risk/reward in companies with a low PEG, under 2. Companies tend to be overbought when their PEG is above 2 so realize that when you buy a stock with a higher peg you risk buying at the top much more so than a stock with a low PEG like 1.
Typically a stock is cheap with a PEG of 1 or lower, expensive with a PEG 2 or higher. PEG is based on trailing earnings however so you need to figure in acceleration of growth. If a company with accelerating growth has a PEG of 10 it might still be cheap so you need to fudge the numbers to account for it.
Good luck and happy hunting. If you have some research tips to add please feel free.
Conference Calls
Conference calls are a great source of information, not just about the company holding it but also about the sector and industry they are in. I recommend you pick the "alpha" stock in each sector and schedule your calendar to listen in (doesn't even need to be live) to what they say they see going forward.
For example, you might want to listen to the XOM call to gauge the pulse of the oil industry. How has the market changed and what are they doing to compensate for those changes? Such tidbits will lead you to look at other companies who stand to benefit. Is there a shortage of rigs available for drilling? Take a look at the drillers. Are they needing to update or expand their capacity? Look at oil services.
PEG ratio
The PEG ratio is the PE ratio/earnings growth. Most financial sites have this information. You will find the greatest risk/reward in companies with a low PEG, under 2. Companies tend to be overbought when their PEG is above 2 so realize that when you buy a stock with a higher peg you risk buying at the top much more so than a stock with a low PEG like 1.
Typically a stock is cheap with a PEG of 1 or lower, expensive with a PEG 2 or higher. PEG is based on trailing earnings however so you need to figure in acceleration of growth. If a company with accelerating growth has a PEG of 10 it might still be cheap so you need to fudge the numbers to account for it.
Good luck and happy hunting. If you have some research tips to add please feel free.
08-02-2007, 07:25 PM
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Ok I just spent 20 minutes writing this whole thing on fads but something got screwed up when I hit submit so here's the short version.
From the pages of Peter Lynch:
Keep an eye out for fads and trends. You actually have an advantage over wall street when it comes to this. They don't see it until the numbers come out but you or someone you know are most likely participating in the fad and you don't even know it.
Example:
3 years ago True Religion Apparel was trading around $1 and now it's hovering around $20. Of course hindsight is always 20/20 but three years ago I knew about these jeans, I knew everyone and their mom was wearing them. A prudent investor may have started to do some research. True, the stock was an OTC BB which turns people off but it's just an example.
The point of this is just to remind you to keep your eyes open for fads and do some research when you think you might spot one. If the fad is part of a larger company it may not have much of an effect on earnings in which case move on. However, you may just come across the next TRLG.
From the pages of Peter Lynch:
Keep an eye out for fads and trends. You actually have an advantage over wall street when it comes to this. They don't see it until the numbers come out but you or someone you know are most likely participating in the fad and you don't even know it.
Example:
3 years ago True Religion Apparel was trading around $1 and now it's hovering around $20. Of course hindsight is always 20/20 but three years ago I knew about these jeans, I knew everyone and their mom was wearing them. A prudent investor may have started to do some research. True, the stock was an OTC BB which turns people off but it's just an example.
The point of this is just to remind you to keep your eyes open for fads and do some research when you think you might spot one. If the fad is part of a larger company it may not have much of an effect on earnings in which case move on. However, you may just come across the next TRLG.
09-12-2007, 11:30 PM
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Find companies with consistently high growth or accelerating revenue growth. You will automatically find companies that beat the competition, have a clean manageable balance sheet, and realistic plans for the future to maintain their growth.
Then you just moniter the situation to see if the company keeps it up. The hardest part of owning a company like AAPL with 20-30% growth year over year in most of their components is knowing when it's just too hard to keep it up. The stock will be discounted severely at that time.
In the instance of AAPL, just realizing their industry is growing/strong, their marketshare in the industry is growing (5% of computers isn't much), they recently developed new ways to make money (ipod), and have future ways to make new money (iphone, itv, itunes products) is reasonable enough evidence to conclude the stock has what it takes to keep growing. If the market share slows ore reverses on a main product, compeition starts growing rapidly, or they reach a strong saturation point like 25% of all PC's, you need to reevaluate the position.
That's about all it takes on an individual company by company basis. This is a more bottom ups approach because you'll eventually need to identify macroeconomic changes [changes in the dollar, changes in sectors, etc.] that could slow that growth. I'm top down but either way can work.
As far as identifying which stocks turn in to a GOOG, can be turned around from big drops in market share; that's another ball game.
Then you just moniter the situation to see if the company keeps it up. The hardest part of owning a company like AAPL with 20-30% growth year over year in most of their components is knowing when it's just too hard to keep it up. The stock will be discounted severely at that time.
In the instance of AAPL, just realizing their industry is growing/strong, their marketshare in the industry is growing (5% of computers isn't much), they recently developed new ways to make money (ipod), and have future ways to make new money (iphone, itv, itunes products) is reasonable enough evidence to conclude the stock has what it takes to keep growing. If the market share slows ore reverses on a main product, compeition starts growing rapidly, or they reach a strong saturation point like 25% of all PC's, you need to reevaluate the position.
That's about all it takes on an individual company by company basis. This is a more bottom ups approach because you'll eventually need to identify macroeconomic changes [changes in the dollar, changes in sectors, etc.] that could slow that growth. I'm top down but either way can work.
As far as identifying which stocks turn in to a GOOG, can be turned around from big drops in market share; that's another ball game.
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11-10-2007, 11:51 AM
#8
if someone is interested in Fixed Income, yes you can make $ with Fixed Income, and macro Economics, Bill Gross, founder of PIMCO mutual Funds writes a monthly letters.
PIMCO has recently hired Alan Greenspan as advisor
www.pimco.com
PIMCO has recently hired Alan Greenspan as advisor
www.pimco.com
01-28-2008, 03:06 PM
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Buy the management and product. Warren Buffet use to go solely by Grahams principles of Security Analysis, knowing all the ratios/numbers etc.
But he admits that he was more successful when applying Phillip Fisher's principles of knowing the management and products.
Companies should not be in business to "Cut Costs" or reduce head count, but rather grow sales, generate new streams of revenue and generally that entails a good management with strong marketing.
My $.02
But he admits that he was more successful when applying Phillip Fisher's principles of knowing the management and products.
Companies should not be in business to "Cut Costs" or reduce head count, but rather grow sales, generate new streams of revenue and generally that entails a good management with strong marketing.
My $.02
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