Work Space for Learning How to Research Stocks
1. Value comes from being able to accurately assess the quality of a company, and putting money into strong ones ¹ (like only putting chips into the middle when having the best hand)
2. Added value comes from capitalizing on other peoples' mistakes - stocks can go on 'sale' when people get pessimistic and sell stocks in companies that are inherently strong, thereby making the price lower than it would normally be ²,³ (pots are bigger when other people make big mistakes)
3. However there's variance due to factors outside one's control:
A. The economic and political climate that surround a company can have as much of an impact on a company's performance as the CEO ⁴ (like a bad board run-out)4. So bankroll management's important for comfortably weathering heaters and downswings ⁶
B. And sometimes info can be incomplete or inaccurate ⁵ (bad outcomes are sometimes unavoidable)
5. And so is tilt management, to ensure that analysis of the fundamental quality of companies stays the primary focus ⁷
Benjamin Graham
Phillip Fisher
Peter Lynch
William O'Neil
Bill Miller
(Graph of the Dow for 2001-2008)
a) Reminding himself that he's sticking with quality - and that quality companies are always rewarded in the long-term.
Guess that's maybe like trying to focus on the quality of one's play, instead of looking at one's graph in the short-term? Here's the Dow in the longer-term, including the recovery after the crash (2001-today) ...
b) Stick with value measures
The experts confirmed that the market's not necessarily 'efficient' in the short-term, and there's definitely bubbles and dips due to people getting overly optimistic or pessimistic - so that's were the extra value can be found, profiting from others' mistakes?
Guess normally stock prices should be rising at about the same rate as profits are rising? Although, found a graph for United Health, for the same period as the first Dow graph up above, 2001-2008 - guess the value measures do show that the price of the stock (in green) was lower than it should be (should have kept rising at the same rate as the profits in red)?
And here's how UNH has done after the crash (2009-today)
Answer:
1. Check analyst reports - is there a reason to expect the company to do well in the long-term future? YES
2. Check Gurufocus.com - see if profits (red line) are doing as well or better than the price (green line) ... YES
It's done really well since ...
Answer:
1. Check analyst reports - is there a reason to expect the company to do well in the long-term future? YES
2. Check Gurufocus.com - see if profits are doing as well or better than the price ... NO
They haven't been doing so great since the crash in 2008, after all those complex financial instruments got outlawed - but after Trump got elected, it's been on fire ...
Now we check Yahoo Finance for the EPS reports of this year, and the overall 2016 estimate - and it says that analysts are only expecting Goldman Sachs to make $15.61 EPS this year? With a so-so-ish record of being accurate with predictions?
Going back to the GuruFocus.com chart to add in the EPS prediction for the end of the year, it looks like Goldman Sachs is WAAAYYYYYY overvalued at $250, and should only be selling for about $150 per share? Guess people are buying up in the hopes that earnings will improve next year - but some of it may be Trump bubble too?
Have also had my eye on that Mid-Cap Cosmetics chain that sells pretty cute stuff, like this bath and body set with two bath fizzies that look like macarons ...
They're not over or under priced ... but they're in the middle of a 5-year expansion, so their stock price and earnings have been rising through the roof ...
BUY: May try to pick up some of this as well for my Tax Free Savings Account, after Dec 13/14 if the prices hopefully drop a bit?