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Author: Tan KW   |   Latest post: Mon, 25 Mar 2019, 5:08 PM

 

Checklist for Buying Good Companies at Reasonable Prices - investbullbear

Author:   |    Publish date:


Thursday, 14 March 2019

 

Here is a summary of the questions an investor should ask for investing in good companies at fair prices.


Questions 1 - 19:  Focus on the areas of the business.

Business Nature
1.  Do I understand the business?
2.  What is the economic moat that protects the company so it can sell the same or a similar product five or ten years from today?
3.  Is this a fast-changing industry?
4.  Does the company have a diversified customer base?
5.  Is this an asset-light business?
6.  Is it a cyclical business?
7.  Does the company still have room to grow?

Business Performance
8.  Has the company been consistently profitable over the past ten years, through good times and bad?
9.  Does the company have a stable double-digit operating margin?
10. Does the company have a higher margin than competitors?
11. Does the company have a return on investment capital of 15% or higher over the past decade?
12. Has the company been consistently growing its revenue and earnings at double digits?

Business Financial Strength
13. Does the company have a strong balance sheet?

Business Management
14. Do company executives own decent shares of stock of the company?
15. How are the executives paid compared with other similarly sized companies?
16. Are insiders buying?

Business Valuation
17. Is the stock valuation reasonable as measured by intrinsic value, or P/E ratio?
18. How is the current valuation relative to historical range?
19. How did the company's stock price fare during the previous recessions?


Question 20:  Confidence in Your Business Analysis or Research

20. How much confidence do I have in my research?




The final question centers on how you feel about your research.  Though it is not directly related to the company, your own analysis is a vital consideration.  It determines your action once the stock suddenly drops 50% after you buy.

That same 50% drop can trigger opposing actions depending on your level of confidence.

  • If you are assured in your research, the 50% drop in price is a great opportunity to buy more of the stock at half the price.  
  • If you don't have confidence, you will likely be scared into selling at a 50% loss.

It will happen after you buy the stock and, paradoxically, it happens only after you buy.  So, get prepared!


The checkup questions are based on the company's financial data.  None of them should replace your work of understanding the business and learning about its products, its customers, its suppliers, its competitors, and the people who work in the company.  The warning signs serve as reminders of where you are.  They are not meant to substitute for understanding.  If we paid attention only to the numbers and signs and ignore the business itself, understanding of the company business is incomplete.

If we gain a solid understanding of the business, these numbers and signs will help us to appreciate where we are and where we are probably going.  If business understanding is qualitative and the numbers are quantitative, both are needed to gain the confidence we need for our research.

The checklist is a useful tool for investors to maintain discipline in their stock picking.
 

 

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  2 people like this.
 
Shinnzaii Good sharing
15/03/2019 10:07 AM
Heavenly PUNTER As always good article
15/03/2019 10:08 AM
kasinathan Based on that criteria.... Can't find a single company in bursa....
15/03/2019 10:13 AM
3iii Dedicate this to all who are searching for a good investing philosophy and method.
17/03/2019 6:39 PM
(70B-SAPNRG-3Yrs) Philip Kasinathan don't give up hope, I found 5 in 10+ years in the bursa market!
17/03/2019 6:43 PM
RainT which 5 companies ? can share ?
17/03/2019 7:07 PM
(70B-SAPNRG-3Yrs) Philip https://klse.i3investor.com/blogs/phillipinvesting/197011.jsp
17/03/2019 10:49 PM
stockraider CORRECTLOH JUST LOOK AT GENERAL RAIDER CALL ON SAPNRG VERY TRUE MAH...!!
U NEED TO BE SMART AND HAVE SPECIAL HARDWORKING TRAINING IN ORDER TO BE SUCCESSFUL LOH....!!

Lessons from – “The Five Rules for Successful Stock Investing” by Pat Dorsey. Pat Dorsey is the Director of Stock Analysis at Morningstar.

· Picking individual stocks requires hard work,discipline and an investment of time (and money). SAPNRG IS NOT CHINCHAI MAH..IT IS MONTHS AND MONTHS OF INTENSIVE RESEARCH DONE VERY CAREFULLY TO GUARANTEE GREAT SUCCESSFUL BUY LOH...!!

· You need patience, an understanding of accounting and competitive strategy and a healthy dose of skepticism . THIS TRUE LOH...RAIDER CAN ASK U TO BUY RM O.30 AND THEN ASK YOU TO SELL RM 0.365 WITHIN 1 MTH AND MAKE 20%, BUT RAIDER DON DO THAT BCOS RAIDER KNOW SUCCESSFUL MAJOR KILLING IN STOCK MARKET, NEED TIME TO DEVELOP, THATS WHY RAIDER ASK U TO KEEP LONG TERM AT LEAST 3 YRS AND 3 MTHS.

· Buying stock means part ownership in a business .YES SAPNRG U ARE OWNING AN OIL N GAS BUSINESS, ALOT OF PRODUCTS NEED THIS RAW MATERIAL INPUT LOH....THUS DEMAND IS CONFIRMED LOH...!!

· Courage of conviction. U JUST LOOK AT RAIDER BOLD CONVICTION AND SAILANG CONVICTION WITH TP POTENTIAL 3.00, AND HOLD LONGTERM WITHOUT WAVERING EVEN MKT SELLDOWN...U WILL UNDERSTAND WHAT IS COURAGE & CONVICTION ABOUT LOH.

· Companies with most conflict of opinion are often best investments ( think contrarian). CORFRECTLOH ALOT OF PEOPLE ARGUE AND BELITTLE RAIDER SAPNRG PICK, BUT RAIDER JUST STANDBY WITH THE GREAT CONVICTION OF SAPNRG SUREWIN, WITHOUT ANY FEAR....BCOS RAIDER KNOW....THIS IS THE BEST PICK U CAN EVER FIND MAH..!!

EXACTLY SIMILIAR TO RAIDER MARGIN OF SAFETY APPROACH
Core principles of investing
o Doing your homework
o Finding companies with strong competitive advantages
o Having a margin of safety
o Holding for the long term
o Knowing when to sell
17/03/2019 11:28 PM
stockraider VERY IMPORTANT INVESTMENT PHILOSOPHY, DON MISSED LOH...!!

See ahead of time

What are the changes now that will alter the status 6 months or 12 months or 2 years down the road?

That is how we see with "eyes in our head".

Not only see & use your brain to think mah.....!!

Make use of your 6 senses to help u make monies loh...!!

Sapnrg in 3 yrs time will be reporting Rm 3b to Rm 5b profit, do u see sapnrg share price still at current low Rm 0.365 leh ?

Most importantly the next 6 to 12 mths there will have positive operations profits coming, profit on disposal oil field of Rm 2.0 billion and potential writeback of impairment previously of rm 3.0 billion as more & more unutilized assets put to good use to service the increasing oil industry loh..!!

With contract in hand secured already rm 19.3 billion, it is likely the huge contract wins will ballooned to record rm 40.0 billion.

Sapnrg is already have the biggest contract award from petronas in msia compare to the rest of OnG companies together combine, and this trend is still growing loh....!!

The share price is increasing day by day loh....!!

Ahfah already see it coming and had summon the courage to buy big, have u done anything yet leh ???
17/03/2019 11:28 PM
stockraider WHICH ONE U PREFER IN YOUR QUEST FOR SUCCESSFUL INVESTMENT WEALTH BUILDING ???

BUY NOW THE SHARE TODAY AND LIMIT UP TOMORROW COMPARE TO BUY THE SHARE TODAY AND UP O.5 SEN TO 2 SEN UP EVERYDAY FOR THE NEXT 200 DAYS LEH ??

RAIDER WOULD CHOSE THE LATTER ?? WHY LEH ??

A} IF U BUY TODAY UP TOMORROW ....YES U MAKE FAST MONIES....BUT CAN U BUILD WEALTH....NOT REALLY LOH...!!
1. IT UP SO FAST DO U HAVE TIME TO BUILD BIG POSITION LEH ?
2. DO U DARE DARE TO BUY BIG BIG...FAST FAST.. WITHOUT INSIDER INFO LEH ?? USUALLY NO NO LOH.....!!
3. THUS LIMIT UP IS ONLY FOR SOONG SOONG PLAY...NOT REALLY SERIOUS MANY MAKING WEALTH BUILDING LOH....!!

B} ON THE OTHER HAND....U SELECTED A GOOD STOCK SLOWLY ACCUMULATE BIG POSITION OVER 3 TO 4 MTHS....U WILL MAKE VERY VERY BIG RETURN LOH...!!

SAPNRG IS THAT KIND OF STOCK THAT WILL MAKE U VERY RICH AS IT GIVE TIME FOR U TO ACCUMULATE LOH....!!
17/03/2019 11:29 PM
(70B-SAPNRG-3Yrs) Philip nice spam. yawn.
19/03/2019 10:17 AM
Heavenly PUNTER raider with his sapura energy, intending to bring people to hell
19/03/2019 10:19 AM


 

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