@pressy79t Most of my picks are due to my positive personal experience or from Valuepickr.
The first thing I usually do when I know about a company is - to do search on the company for any fraudulent, unethical or questionable deeds of the management. If I am not satisfied I don't do further research on the company.
Then I read interviews by the management and MD & A from AR for better understanding of the company and how gets impacted by macro economy. I also speak to friends if there any rumours which don't get published in news papers. Porters 5 forces framework also helps me a lot to understand the moat. Any red flags, I would stop further work.
Then I look at growth numbers, return ratios, cash flows, etc. I do check P/E, but it is not a show stopper. If I find any issues I will dig further. If not, I add the company with a tracking position. If my opinion about the company does not change for the next few months, I will add more. When I strongly believe the management I try to give benefit of doubt. If I find any any serious issues later I will still come out of it.
I try not to have more companies from same industry from portfolio management perspective. When economic indicators are bad, I try to reduce my exposure to stock market. I have seen three major crashes from 1998. I am lucky to escape with good profits two times. Once, I got screwed as I got greedy and leveraged my portfolio for real estate investment.
I feel most of the things in life are simple to understand, we complicate them unnecessarily (Last week, I was trying to measure portfolio risk by calculating co-variance, correlation coefficients, etc. based on historical numbers when I know by practical exp. that correlation coefficients would be close to 1 during major uptrends and downtrends when most of the stocks tend to behave in a similar way).
This is how I do it. It may or may not work for you.
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