Done all the research, identified companies, but still won't buy

[ENP]

I get a bit bogged down with research..

I identify good companies that I wish to invest into, look over their financials, annual reports, etc.

But I have an issue pulling the trigger and buying it. Some of the companies I wished to buy a year or so ago have jumped up in value and dividends while my money is still in the bank.

How do I uncover a strategy or formula do find out what price I should pay? A formula that tells me in black and white that this is a price to pay for a particular company?

I'm mainly from a value investor type approach.

 

[pedalofogus]

The best resource i have found for Value Investing is Roger Montgomery's book 'ValueAble'

You will find a thread discussing his methodology under the 'Long Term Investing' thread section in ASF.

Although his formula does still require the investor to make some decisions, and determine their own required rate of return, his formula is very good and generally identifies stocks that are under valued. But it only works for valuing companies with positive EPS, and doesn't work for speccy mining stocks etc.

Its pretty simple as well. All you need is a knowledge on how to read financial statements (or alternatively the key financial details you can get from Etrade etc), and you just plug that data into a formula that he has come up with. It then gives you a value and you can work out for yourself whether it is over or under the current SP, and by how much.

Well worth the purchase price of the book in my opinion.

 

[burglar]

... But I have an issue pulling the trigger and buying it. ...

Get a mentor, preferably in "the grey".
A mentor will know when you're ready and encourage you to dip a toe.
(or bite the bullet)

 

[joea]

I get a bit bogged down with research..

I identify good companies that I wish to invest into, look over their financials, annual reports, etc.

But I have an issue pulling the trigger and buying it. Some of the companies I wished to buy a year or so ago have jumped up in value and dividends while my money is still in the bank.

How do I uncover a strategy or formula do find out what price I should pay? A formula that tells me in black and white that this is a price to pay for a particular company?

I'm mainly from a value investor type approach.

Hi.
Go to Intersuisse site if you are interested in emerging companies.
You sign in and get fundamental reports.
Then utilise your entry - exit strategy and Bob's your uncle.
I will even send you one.
Trading is supposed to be fun.
As for the formula, have you dug under a rainbow?
Cheers.

 

[Julia]

ENP, you're experiencing what many do when they are beginning. Imo it's usually unresolved until you actually make your first transaction. I'd suggest just making your first buy with a company you know has excellent fundamentals, putting just a small amount of dollars on it.

Many of us are reluctant to take a risk on something with which we are unfamiliar.
I doubt it will get any easier if you hold off.
With now several days of a falling market there are some reasonable buying opportunities.

Just don't have the expectation that you will not make mistakes. Even the most experienced traders/investors get it wrong and quite often.

Just have a go. It is not the end of your financial future if it's not the greatest trade ever executed. It's only with practice and experience that you will develop skill and understanding.

 

[Tysonboss1]

I get a bit bogged down with research..

I identify good companies that I wish to invest into, look over their financials, annual reports, etc.

But I have an issue pulling the trigger and buying it. Some of the companies I wished to buy a year or so ago have jumped up in value and dividends while my money is still in the bank.

How do I uncover a strategy or formula do find out what price I should pay? A formula that tells me in black and white that this is a price to pay for a particular company?

I'm mainly from a value investor type approach.

Good business



Bad business

 

[Tysonboss1]

I get a bit bogged down with research..

I identify good companies that I wish to invest into, look over their financials, annual reports, etc.

.

What sort of reasearch do you do, what are you looking at when you read the annual reports?

 

[AlexG1]

The best resource i have found for Value Investing is Roger Montgomery's book 'ValueAble'

.... it only works for valuing companies with positive EPS, and doesn't work for speccy mining stocks etc.

So what are the best places to get good quality information on speccy small cap stocks. There's plenty of sales pitch stuff around promising massive returns - but I'm pretty cautious of that.

I'd like to get some controlled exposure to speculative plays but not sure where to get the best information from.

Any hints?

 

[Tysonboss1]

So what are the best places to get good quality information on speccy small cap stocks. There's plenty of sales pitch stuff around promising massive returns - but I'm pretty cautious of that.

I'd like to get some controlled exposure to speculative plays but not sure where to get the best information from.

Any hints?

By this I guess you mean start up companies that are yet to turn a profit. Picking winners here is not my game, But I guess a solid understanding of the industry they are in, along with a solid understanding of the companies finances and understanding of the amount of money they will have to sink into the project before it is profitable would be wise. You would need to have an idea of the companies production costs along with the sale price of the products they are delivering to market.

The list of risks is long, and the end result might be that your odds of picking winners is similar to picking the winning number on the roulette wheel.

 

[springhill]

So what are the best places to get good quality information on speccy small cap stocks. There's plenty of sales pitch stuff around promising massive returns - but I'm pretty cautious of that.

I'd like to get some controlled exposure to speculative plays but not sure where to get the best information from.

Any hints?

Quarterlies, half yearlies and full year accounts. Go through as many as you can, i literally pore through hundreds and hundreds of them.
Company announcements. Form watchlists and keep an eye on them
Compare shares on issue, cash at hand, MC, directors with good pedigree, expenses - where the expenses are going (in actual groundwork or admin), charts, liquidity.
Look for drilling programs coming up in good areas.
When do SP's usually jump? pre-drilling, during, after or do the smart ones get on before they are announced.
Learn what to look for, see the patterns.
Investing in specs takes work and dedication, but it's worth it IMO.

 

[ENP]

What sort of reasearch do you do, what are you looking at when you read the annual reports?

I look for the following and in this general order:

- consistent increases in EPS over 10 years.
- consistent increases in dividends over 10 years.
- consistent increases in total sales over 10 years.
- consistent increases in net profit over 10 years.
- consistent increases in return on capital over 10 years.

- above average gross profit margins compared to its competitors.
- below average advertising and upkeep expenses compared to competitors.
- manageable debt/borrowing levels.

And lastly, a company that I think will be making more money in 5/10/15 years time from today.

Basic criteria I look for.

If they aren't increasing their EPS and dividends per year, then I don't even bother reading any more.

 

[Tysonboss1]

I look for the following and in this general order:

- consistent increases in EPS over 10 years.
- consistent increases in dividends over 10 years.
- consistent increases in total sales over 10 years.
- consistent increases in net profit over 10 years.
- consistent increases in return on capital over 10 years.

- above average gross profit margins compared to its competitors.
- below average advertising and upkeep expenses compared to competitors.
- manageable debt/borrowing levels.

And lastly, a company that I think will be making more money in 5/10/15 years time from today.

Basic criteria I look for.

If they aren't increasing their EPS and dividends per year, then I don't even bother reading any more.

Well that a very good start, Now you just have to pool that infomation and come up with a fair value for each share, remember return on equity (roe) and equity per share is more important than earnings per share.

then purchase that share at a price that gives you a margin of safety and use diversification so any one error doesn't wipe you out.

But you have to pull the trigger, if you have done the homework and know the business you are buying, just buy it. whats the worst that can happen.

 

[burglar]

... Go through as many as you can, i literally pore through hundreds and hundreds of them. ...

I fully endorse all that, but with a hint of caution.
I can now pick a company but still can't guess the market direction.

 

[Logique]

ENP you need to do some research on charting. Entry and exit points by the TA aren't all that difficult. The XAO Analysis thread in here is a good one to read, some good chartists in there.

Admire your patience, but you don't want to get bogged down in 'paralysis by analysis' on the FA side of things.

Don't buy a stock if you can't understand their business well enough to buy in.

 

[AlexG1]

The list of risks is long, and the end result might be that your odds of picking winners is similar to picking the winning number on the roulette wheel.

Yes - that's what I'm afraid of

I'm happy enough to pay for a service (within reason) if anyone can recommend a reliable service that provides coverage of these types of company - I guess that the services are likely to be industry specific since the research would require a little more digging.

Also wary of the risk that the provider of info may profit from the advice given to a large number of readers in an illiquid stock.

Interested in these from the point of view that there's potentially higher returns (and obviously higher risk). Also trying to get hold of something with real potential before things like the big funds start to buy into it - which is just another way of saying higher returns I guess.


Alex.

 

[Iggy_Pop]

If you are after information on small cap speccies, I use the following and find them OK-

http://www.proactiveinvestors.com.au/ Free service

And I subscribe to Drillers and Diggfers and Australian Small Cap Investigator

http://www.portphillippublishing.com.au/index.html

Found using all sources as well as searching internet and stock forums has been a good approach.

 

[Tysonboss1]

Yes - that's what I'm afraid of

I'm happy enough to pay for a service (within reason) if anyone can recommend a reliable service that provides coverage of these types of company - I guess that the services are likely to be industry specific since the research would require a little more digging.

Also wary of the risk that the provider of info may profit from the advice given to a large number of readers in an illiquid stock.

Interested in these from the point of view that there's potentially higher returns (and obviously higher risk). Also trying to get hold of something with real potential before things like the big funds start to buy into it - which is just another way of saying higher returns I guess.


Alex.

If you are after information on small cap speccies, I use the following and find them OK-

http://www.proactiveinvestors.com.au/ Free service

And I subscribe to Drillers and Diggfers and Australian Small Cap Investigator

http://www.portphillippublishing.com.au/index.html

Found using all sources as well as searching internet and stock forums has been a good approach.

While there is nothing wrong with small caps in general, I would be steering well clear of any speculative stock. To be successful in investing and build large amounts of wealth you don't have to make huge % gains by taking huge risks, you just have make steady returns and let them grow exponentially by never losing anything.

 

[AlexG1]

While there is nothing wrong with small caps in general, I would be steering well clear of any speculative stock. To be successful in investing and build large amounts of wealth you don't have to make huge % gains by taking huge risks, you just have make steady returns and let them grow exponentially by never losing anything.

Thanks Tyson - always find your posts well considered and informative.

Also thanks to others who have replied

I certainly don't want to speculate wildly, but I am interested in putting a small portion of my portfolio into well researched stocks with a possibility of higher returns - which seems to generally equal small caps. As I don't have access to adequate information to make informed decisions about such purchases, I need to find a reliable source for getting quality unbiased information.

Every purchase we make is based on some speculation The margin of safety is really our management of the risk that the information we are basing our decisions on is correct/complete. If you have a reliable and proven information source, then that is one risk that is lessened.

One of the risks I'm weighing in my consideration of doing this is that it's going to require some significant focus on a small part of the market. That may mean that a proportionately larger part of my time/money (for advice not investment) is focused on a smaller part of the market which impacts diversification..

Not sold yet - but considering

Also - thanks Iggy. How do you find Diggers and Drillers? I have looked at some of his promotional stuff and find it's salesy nature bothers me. It sniffs of spruiking to me. Has it provided you with useful information?

Alex.

 

[Tysonboss1]

1, but I am interested in putting a small portion of my portfolio into well researched stocks with a possibility of higher returns - which seems to generally equal small caps.

I don't really agree, But I suppose it depends on what you can 'Higher returns', If you mean gains as large as 100%p/a then you will no doubt have to limit your capital to speculative penny stocks and you will need alot of luck on your side,

But if by higher returns you just mean returns that out perform the stockmarket averages, then this can be achieved using companies of any size if you apply strict value investing principles.

I think you will get some value out of this video.

.

 

[burglar]

... speculative penny stocks and you will need alot of luck on your side ...

Paul Clitheroe says stay away from penny dreadfuls unless you know what you are doing!
I say, how do you learn if you stay away?