Here I outline the 7 points of Due Diligence when selecting a business to invest in. It goes over the 7 points which are financial health of a companies balance sheet, cash flow generation of a company, stock valuation ratios, fair value of a companies stock, dividend evaluation, qualitative information and technical analysis.
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The first of seven points of due diligence is the balance sheet and financial health of a company. Looking for financial stability, low debt to assets ratio. This is key for me in preserving capital. Peter Lynch once said a company with no debt cannot go out of business.
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The second in the stock picking series covering analysis of the revenues, earnings and cashflows of a business to grow the balance sheet. Fundamentals screens are from Gurufocus my choice for research.
The third in the stock picking series covering analysis of the price ratios of a companies stock including price to earnings (PE), Price to Book (PB) and Price to Free Cash Flow (PFCF). Fundamentals screens are from Gurufocus my choice for research.
Our fourth video covers discounted cash flow calculation to determine a fair price for a stock.
Always good to look at intangible information before buying a stock. I look at a few areas to find information that could make or break a purchase.
The final thing I look at for picking a stock is the technical analysis. Chart reading gives some insight to investor psychology. I use simple technical analysis to help me with purchase and sales to re-balance my value investments.
Conclusion to the portfolio management and stock picking play list in StockStory. Please note on the bike I say the true value of a business is the intangible book value for a given moment but that should be tangible book value as I do not put financial weight on items such as good will but instead use them in my subjective evaluation of the company.
StockStory is not a financial advice site and content should not be considered for investment recommendations.
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