Wednesday, August 31, 2011

Focus Value Investing (Criteria of company selection & buying)

Believe in a few core business that is understand well. Spread money across at least 8-10 stocks with the circle of competence.
We going against the market. Buy stock of a good company when the stock price extremely low & attractive
With high level of competence of financial & business competence, to make high level of RETURNS!

High level of Probability of Success.. GREAT COMPANY in BIG DISCOUNT:


  1. 5 years History of consistently increasing of sales, earnings & cash flow. if this company show increasing of Sales & Earning, especially during recession, high chance it will continue to maintain it's performance. Sales will be the core measure as it cannot be change, but earning can be manipulate. If a company shown a increase of earning but drop in sales, must be careful..For cash flow, operating cash flow is how a company cash flow in operating the company. An increasing means more cash to operate the company.
  2. Sustainable competitive advantages, such as a strong brand, patents & trade secret, gigantic economies scale, market leadership among competitors and High switching cost.
  3. Company that have future growth plan in-place, example develop new products line, new application of patent, open new market, building more outlet & expansion of capacity.
  4. Conservative debts, can be measure by the long term debts is less than 3 times of current net earning/ net income. This is to ensure the company can payback the debt within 3 years.
  5. Return of Equity(ROE) that above average >15% per year. ROE is calculated base on Net income divide by total share equity.
  6. Low capital expenditure (CAPEX) is required to maintain current operations. Avoid companies that have high earnings, but majority of portion has to go to maintenance or replacing plant & equipment
  7. The management is holding or buying the company stock. 
  8. Stock is undervalue, which is at or below intrinsic value.
  9. Stock price is consolidating or is at up-trend. Compare stock price with volume of trading. Use technical analysis to identify up-trend, down-trend & consolidation. Go in when break out occurred.



No comments: