Here are some of the things we have discussed today. Take a look. Familiarize yourself with the ratios and for the next meeting we will talk about which ratios or indicators we should follow:
- P/E ratio – Good P/E would be 15.
- How long it will take to get residual income by looking at stock price/dividend.
- Return on Equity (ROE). Look for companies with 15% ROE or higher.
- Debt to Equity (D/E). Look for companies with less than 1 D/E.
- Price to Book (P/B). Look for companies with less than 1.5.
- Forward Price Earnings. Look for companies less than 20.
- Look and compare cash flows of different companies. Look at price to cash flow or cashflow/share or current ratio. Look for companies with current ratio between 1.5 to 5.
- Look at the charts. Moving Average for 5 years. You can also look at SMA or EMA.
- Volume is important in a stock.
- Cash flow must be higher than inflation and on par or higher with market growth. Example: Look at competitors, see if their cash flow is better than the company’s cash flow statement.
- Look for companies with large MOAT. This gives barriers to entry and a competitive advnatage for company.
- Look at sales and compare COGS (cost of goods sold). Sales should be higher than 10%.
- Look at inventory turnover, to see if company is selling products and compare with other companies.
- Don’t jump into a stock when it is hyped.
- Don’t believe the internet, emails, media, CNBC, Cramer.
- Have a stop loss for your stocks.
- Follow intuition and don’t take opinions.