Wednesday, July 15, 2009

Notes on Stock Picking

Jenni's strategy on picking great stocks:

 
 

beta greater than 1 is risky (good for under 45 years old)

 
 

Look for growth stocks (if you're under 45)

 
 

eps=1.50 or higher

 
 

Small cap - 5% of portfolio or so. Look for $7/share or greater, 25% growth in sales and earnings, net profit margin >7%

 
 

Net income/shares=earnings per share (EPS)

 
 

Share price/Eps= Price equity ratio

low Pe= good by (or could mean bad news is looming ahead)

Stock screen: p/e less than 30

 
 

 
 

PE/EPS expected growth % 1 yr= PEG <1=good buy 1=1 fair >1=overpriced

-use to evaluate growth stocks

 
 

PE/EPS expected growth 5 year=YPEG <1=good buy 1=1 fair >1=overpriced

-use to evaluate regular stocks

 
 

REVENUE value:

Price Sales Ratio = PSR

(Shares outstanding * share price + debt)/revenues over past 4 quarters= PSR

-the lower the psr the better

 
 

Shareholder equity/# shares outstanding = book value

-the closer you can buy to or lower than book value, the better

 
 

Shareholders equity/net profit= ROE (return on equity)

-the higher the ROE the better

 
 

Debt/equity= Debt to equity ratio

-the lower the better

 
 

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