GAME PLAN – Aug 30, 2014

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:

  1. P/E ratio – Good P/E would be 15.
  2. How long it will take to get residual income by looking at stock price/dividend.
  3. Return on Equity (ROE). Look for companies with 15% ROE or higher.
  4. Debt to Equity (D/E). Look for companies with less than 1 D/E.
  5. Price to Book (P/B). Look for companies with less than 1.5.
  6. Forward Price Earnings. Look for companies less than 20.
  7. 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.
  8. Look at the charts. Moving Average for 5 years. You can also look at SMA or EMA.
  9. Volume is important in a stock.
  10. 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.
  11. Look for companies with large MOAT. This gives barriers to entry and a competitive advnatage for company.
  12. Look at sales and compare COGS (cost of goods sold). Sales should be higher than 10%.
  13. Look at inventory turnover, to see if company is selling products and compare with other companies.

 

Other points:

  1. Don’t jump into a stock when it is hyped.
  2. Don’t believe the internet, emails, media, CNBC, Cramer.
  3. Have a stop loss for your stocks.
  4. Follow intuition and don’t take opinions.

 

Websites:

  1. canadianinsider.com
  2. morningstar.com
  3. socialfinance.ca
  4. stockhouse.com
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