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Picking stocks for long term investment

Discussion in 'Investing' started by TomB16, Feb 10, 2019.

  1. TomB16

    TomB16 Active Member

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    I'd like to put together a thread, similar to Pokey and WXYZ, with a walk-through of my entire approach and regular reports on status. We are extremely fortunate to have a few people who share what they do so we can use their ideas and wisdom.

    After several failed attempts to create a thread, "TomB16's investing for fun and profit", the problem has been stock selection. I've been following companies for years. How do you tell someone to read every quarterly report, read news, and follow a company for years? I didn't do that, when I first got into investing.

    Relentless research is what investing is about. Anything else is gambling, IMO. Strategies like Couch Potato are designed to eliminate the research so these should be investigated, instead of individual stock investing, for those who don't want do do the work.


    Here is the philosophy:

    - I don't buy stocks. I buy companies. The stock market is merely a mechanism with which to buy a company.

    - I buy a company I want to own for 10+ years.

    - I'm a bit emotionally invested in these companies and I want to see them do well. This emotional involvement is calming during trouble periods.

    - I tend to prefer a company that distributes profit to a company which re-invests but this isn't absolute. For example, I'm glad Tesla doesn't pay a dividend and is exclusively focused on expansion. Meanwhile, a REIT that doesn't pay a dividend is useless to me. Each sector has unique factors in determining value.

    The approach:

    - Track every company you want to own.

    - Buy from the list of companies you want to own but only when those companies show value.

    - Valuing companies is the secret sauce to investing. I won't share all of my techniques but will say I have used Graham techniques to good advantage. It's a good place to start. The techniques I've developed have been relatively simple and straight forward.

    - History is your friend, with regard to valuing companies. Goldman Sachs has a market cap of $73B and it creates $36B in revenue. That's nearly 50%. This helps us understand the $800M financial services company creates $113M of revenue is a dog by comparison so this business needs to be evaluated with regard to it's growth trajectory because that is the only way it will have value.
     
    #1 TomB16, Feb 10, 2019
    Last edited: Feb 10, 2019
    T0rm3nted, StockJock-e and WXYZ like this.
  2. StockJock-e

    StockJock-e Brew Master
    Staff Member

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    Great writeup, thanks!
     

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