I spare you all the technicals which you can search yourself and jump straight down to the methodology of how I found my gems.
First, narrow down a total of 1025 stocks in Bursa using Warren Buffet's simple rules:
1. Debt to Equity Ratio < 0.5
2. Current Ratio > 1.5
3. ROE > 10 (Buffet prefers higher, i use lower here since Bursa's ROE is not as high as US)
You then left with only 103 stocks.
Then, proceed to make sure stocks with only QoQ and YoY growth, they must make consistant and continuous profits in the last 4 quarters.
Next, very important to filter out all stocks that does not generate Free Cash Flow (FCF) or very little FCF, I use Price to FCF Ratio < 20 here to improvise, cause Cash Flow is the blood of business.
Notice that I ignore PE so far, because after you have gone throught all the methodology I mentioned above, you will certainly reach low PE anyway, that is why the focus is not PE but everything else mentioned earlier.
Finally, choose only Top 3 stocks (by lowest P/FCF) that comes from 3 different business model.
So, guess which stock do i get eventually?
I will give you the answer when we reaches 20 comments below.
So post your comments here and check back this space for the answer to the 3 gems i found.
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