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How to pick a good stock to 2x 4x 10x?


Green Devil
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Green Devil

I hear a lot of YTbers talking about stock picking based on financials and balance sheets, growth, PE ratios etc. Does anyone have experience with this? Picking a stock but understanding the financials? What are you you looking for.

Take 2 for example

https://finance.yahoo.com/quote/XOM/financials?p=XOM

https://finance.yahoo.com/quote/AMZN/analysis?p=AMZN

Obviously they are two diff stocks you buy for different reasons, but what do the financials tell you?

 

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SpectrumFX
Posted (edited)

With those two stocks you're basically talking about the difference between what Benjamin Graham called "Value Stocks" and "Growth Stocks".

When you're looking for value stocks you look at the financials to try and work out if the actual value of the company (in terms of assets or earnings going forward) is misspriced by the market. If the market capitalisation is lower than your judgement of the fair value of the company, and/or the price is a small multiple of the earnings then it's probably worth buying on a value basis (in practice it's a little bit more complicated because there might be something else wrong with it). XOM has a price to earnings ratio of circa 10, which is pretty good if they can sustain or improve on that over a decade or more.

With a growth stock you're buying it based on what you think it's going to become rather than what it is, so the financials are uuseles for giving you a value on that basis because they're all backward looking rather than forward looking. Amazon has a price to earnings ratio of circa 60. It's terrible value based on that, but people think it's going to grow and have much bigger future earnings through the domination of the online marketplace, so they happily overpay on a value basis.

It's the growth stocks that you'd be looking at for multibaggers, but they're typically much higher risk, because by the time you find out about them they're already overpriced on a value basis.

One area of the financials it's worth looking at for both value and growth stocks is cash flow and general solvency. You don't want to buy anything that's in the process of going bust.

Edited by SpectrumFX
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wherebee

It's also important to remember that the market can massively misprice companies and whole sectors, due to the madness of crowds.  I'd class FAANGs as probably in that category - to refer to @SpectrumFX I don't think many retail investors have done deep analysis on Amazons future cash flows - I think they have FOMO and think it can only go up because stonks.

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SpectrumFX
5 hours ago, wherebee said:

It's also important to remember that the market can massively misprice companies and whole sectors, due to the madness of crowds.  I'd class FAANGs as probably in that category - to refer to @SpectrumFX I don't think many retail investors have done deep analysis on Amazons future cash flows - I think they have FOMO and think it can only go up because stonks.

Hardly anybody does any thorough analysis before investing. I know I don't.

I occasionally do proper due diligence reviews for work, which involves pulling the last 3 years of a companies accounts and looking at the trends in revenue, cashflow, net assets etc. The most I've ever done for my personal investments is glance at the price to earnings.  I mostly buy funds in sectors that I'm guessing are going to do well overall, and I buy some individual stocks that I think look sexy after eyeballing their chart for five minutes.

xD

 

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wherebee
32 minutes ago, SpectrumFX said:

Hardly anybody does any thorough analysis before investing. I know I don't.

I occasionally do proper due diligence reviews for work, which involves pulling the last 3 years of a companies accounts and looking at the trends in revenue, cashflow, net assets etc. The most I've ever done for my personal investments is glance at the price to earnings.  I mostly buy funds in sectors that I'm guessing are going to do well overall, and I buy some individual stocks that I think look sexy after eyeballing their chart for five minutes.

xD

 

yeah, ditto, to a large extent.  Although i also apply my knowledge of industry sectors from years of working across the world - for example, I won't invest in any mainland chinese companies as I don't trust a single financial statement.  I won't invest in any woke companies I see which champion management as created by %age quotas (hello Deustche Bank!).  And I won't invest in any company which JP Morgan says is going to do well....

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wherebee
Posted (edited)

OK - another example of taking profits which has worked out for me: Marenica Energy (MEY)

Bought originally 1000AUD in November - 9c a share,  over 11000 shares

Doubled quickly, so I sold 11,000 shares in Jan for an average of 16 cents, just missing the high.  1800AUD back in the pocket.  Very small holding left at that point.  Worst case - it shoots up and I made 800AUD, which is almost doubling my money.  Best case - it crashes and I can buy in if I want.

Price dipped to 14 cents in Feb again.  Bought again 1000 AUD.  Only 7500 shares now, but the 800AUD profit is locked in.

Price starts to rise again.  Sell 1000AUD worth in May at 22c.  Left with 3000+ shares.

So between Nov-May, I put in 1000AUD, got out 1800AUD, and have 3000+ shares left.  

June, shoots up further, that 3000+ shares at 34c worth around 1100AUD.  If I sell today, I have got back 2900 on a 1000AUD investment.  As it is, the CEO has said he is not selling the company until there is a dollar sign in front of the share price, and uranium looks like it's on a roll.  I'll sit on those 3000+shares as a solid hold now.

You could say I lost out on maximum return, as if I had held onto those 11000 shares from November, right now I'd have almost 4k in value, as opposed to my '2900'.  true, but I prefer 1800 in the pocket and a potential further return for no risk, than seeing '4k' fall to nothing if something unexpected happened.  The share price was 20c a few years ago before falling to my buy point, so it can happen.

Hope this helps people understand how to balance risk with cementing your gains.  works for me, anyway :)

 

 

 

Screen Shot 2021-06-01 at 4.10.46 pm.png

Edited by wherebee
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goldbug9999
Posted (edited)
3 hours ago, SpectrumFX said:

Hardly anybody does any thorough analysis before investing. I know I don't.

And realistically what would a keen amateur be able to spot that a professional at trading desk or managed fund would miss ?.

Edited by goldbug9999
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goldbug9999
14 hours ago, Green Devil said:

I hear a lot of YTbers talking about stock picking based on financials and balance sheets, growth, PE ratios etc. Does anyone have experience with this? Picking a stock but understanding the financials? What are you you looking for.

Take 2 for example

https://finance.yahoo.com/quote/XOM/financials?p=XOM

https://finance.yahoo.com/quote/AMZN/analysis?p=AMZN

Obviously they are two diff stocks you buy for different reasons, but what do the financials tell you?

 

So why arn't these youtubers all billionaires from actually trading on their amazing insights ?, why to they have to bother with the massive ball ache of making youtube videos ?.

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goldbug9999
2 hours ago, wherebee said:

You could say I lost out on maximum return, as if I had held onto those 11000 shares from November, right now I'd have almost 4k in value, as opposed to my '2900'.  true, but I prefer 1800 in the pocket and a potential further return for no risk, than seeing '4k' fall to nothing if something unexpected happened.  The share price was 20c a few years ago before falling to my buy point, so it can happen.

Hope this helps people understand how to balance risk with cementing your gains.  works for me, anyway :)

Couldnt you could also de-risk it by doing a buy-and-hold on several similar companies, rather than micro managing one  ?

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Green Devil
2 minutes ago, nirvana said:

you want a 10x.... Solana???

No, i want to know what im looking for when i look at company financials. Not some crypto coinflip (already have enough of that shit 😂😂

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nirvana
14 hours ago, Green Devil said:

you've chosen 2 'outliers' there methinks or maybe not outliers but easy to explain why they've gone up a lot

Oilies were bombed out last March cos of the stock market tantrum/convid so were a clear buy and oil is now back in demand

Bezos is just a complete cunt who is 'cornering the market' and intent on crushing the little man.......credit to him for seeing what was gonna happen to the internet 20 years ago

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Green Devil
Just now, nirvana said:

you've chosen 2 'outliers' there methinks or maybe not outliers but easy to explain why they've gone up a lot

Oilies were bombed out last March cos of the stock market tantrum/convid so were a clear buy and oil is now back in demand

Bezos is just a complete cunt who is 'cornering the market' and intent on crushing the little man.......credit to him for seeing what was gonna happen to the internet 20 years agoim

Yeah. Dont get hung up on who they are. Analyse the financials. Any two companies would of done. 

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nirvana
Posted (edited)
11 minutes ago, Green Devil said:

Yeah. Dont get hung up on who they are. Analyse the financials. Any two companies would of done. 

yeah fair enough.....my advice, follow the money, follow the big boys......be a little fish nibbling on their scraps :P

It makes be laugh when folks say 'ooh the market has got this one wrong' 'the FAANGS are massively overvalued'

Well maybe BUT Mr Market can remain irrational for far far longer than YOU can remain solvent 

Just accept PRICE is what it is and manage your risk......

Stock Market is an interesting example of where you can keep adding on the dips and you pretty much 99% guarantee it is gonna recover cos that's where all the central bank printing is going

In fact there's a pretty valid argument that pro traders/investors don't bother with individual stocks at all.....you just buy 'the whole market' cos the FED have 'got your back'......like they have for over 20 years since the Greenspan Put 9_9

PS DAX is mooning today and US futures are on a rip, FED must have promised em more money over the weekend xD

Plus, it's not really about 2x 4x 10x in this regard, if you can make 1% per day on a 10k investment, look where that's gonna compound to in a very short period of time :D

Edited by nirvana
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nirvana
Posted (edited)
32 minutes ago, Green Devil said:

i want to know what im looking for when i look at company financials

problem is you often can't tell cos they all 'cook the books' nowadays.....and companies like Apple mooned cos they borrowed money at ultra low interest rates and embarked on a process of 'share buybacks' that sent the shares even higher! Methinks it's all a game of 'smoke and mirrors' and you can't trust any of the fuckers nowadays.....trust price alone my man :)

In other news I see Goldmans are ramping ETH again lol

“A blockchain platform like Ethereum could potentially become a large market for vendors of trusted information, like Amazon is for consumer goods today.” — Goldman

 
Edited by nirvana
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nirvana
Posted (edited)
4 hours ago, SpectrumFX said:

proper due diligence

yup always works doesn't it, like when HP got shafted with Autonomy* xD

The DD they used to do at HBOS was a farce too, probs why the cunts went bankrupt and the twat Brown had to ring up Lloyds to bail em out.....tax payer always foots the bill :Jumping:

*this is not small stuff we're talking about! they had to write off $8.8billion on a $11billion acquisition! You couldn't make this shit up! O.o

Edited by nirvana
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SpectrumFX
52 minutes ago, nirvana said:

yup always works doesn't it, like when HP got shafted with Autonomy* xD

The DD they used to do at HBOS was a farce too, probs why the cunts went bankrupt and the twat Brown had to ring up Lloyds to bail em out.....tax payer always foots the bill :Jumping:

*this is not small stuff we're talking about! they had to write off $8.8billion on a $11billion acquisition! You couldn't make this shit up! O.o

To be fair my due diligence almost always shows the company to be a piece of shit, and then managemet carry on and do what they wanted to do anyway.

xD

 

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goldbug9999
Posted (edited)
1 hour ago, nirvana said:

 that's where all the central bank printing is going

Thats the big market driver, everything else is noise.

Tech stocks, PMs, crypto (I mean bitcoin of course just saying "crypto" to be polite to shitcoiners like @nirvana B|) is where you want to be.

Quote

Plus, it's not really about 2x 4x 10x in this regard, if you can make 1% per day on a 10k investment, look where that's gonna compound to in a very short period of time :D

Having a play with https://www.thecalculatorsite.com/finance/calculators/daily-compound-interest.php

Inital £1000 1% gain  compounded daily for 1 year = £37k

Initial £1000 1% gain compounded daily for 5 years = £77 billion

So if you can make 1% consistently for any appreciable time period that would put you top of the world investing leader board.

 

Edited by goldbug9999
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nirvana
2 hours ago, goldbug9999 said:

Tech stocks, PMs, crypto (I mean bitcoin of course just saying "crypto" to be polite to shitcoiners like @nirvana B|) is where you want to be.

I keep telling you ADA ain't a shitcoin :P That Silver is a POS, wish I hadn't bothered.....I'm only hodling cos I know it'll take off as soon as I sell lol

What Techs are you holding? 

Cheers

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Hancock
10 hours ago, nirvana said:

 

Plus, it's not really about 2x 4x 10x in this regard, if you can make 1% per day on a 10k investment, look where that's gonna compound to in a very short period of time :D

Stick 10k on 1/100 shots for 6 months then take a couple of years off.

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nirvana
Posted (edited)
15 hours ago, nirvana said:

That Silver is a POS

told ya, spiked up so 'they' smacked it down again, so predictable :P

Edited by nirvana
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nirvana
8 hours ago, Hancock said:

Stick 10k on 1/100 shots for 6 months then take a couple of years off.

I haven't bothered working for a long time :) you only way you're gonna get 1/100 shots is inside info on shitcoins methinks....'doggy coin' up 15% in 24hours, has Musky been tweeting about it again O.o

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wherebee
On 01/06/2021 at 18:35, goldbug9999 said:

Couldnt you could also de-risk it by doing a buy-and-hold on several similar companies, rather than micro managing one  ?

Yes, but there would be a cost in terms of time, dealing fees, tax calcs, and monitoring across multiple holdings, and if you put, say, 100 AUD in 10 companies, highly unlikely that all 10 will give you returns as one good pick does (excepting a silly bull market).

I prefer having a small number of holdings (less than 20) that I can be on top of without much thought.  75% are mainstream, 20% less well known, and 5% small cap potential boomers.

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