Iām still learning a lot probably like yourself so theyāll be a lot better people placed than me to answer this question. Iām also mainly an index investor opposed to individual stocks. But hereās what I use
On the technical analysis side of things, Iām not a trader so I tend just to check the 50 and 200 day SMA. I look at the RSI but these but the RSI doesnāt hugely influence my decision. Where as the 50 day is a good sense check.
On more of a fundamental side im still very simple. Just the normal price to back, sales, growth and earnings. Also with earnings forecasts factored into. Debt to equity is something key to check.
The main thing I use finally is to check against competitors in the same sector.
I have been meaning to start playing in my practice account with companies that trade at a low PB ratio but high earnings forecast.
If youāre looking at dividend companies then remember to check the dividend history.
All that being said, I donāt have lots and lots of time so I tend to do indexās and a select few companies that arenāt so risky.
As I said though Iām not too experienced so theyāll be a lot more qualified people than me as Iām constantly learning. But itās a long term game for me so Iām not in a rush
I admit fully to needing to do more research on stocks and charts but working full time sometimes takes over a little.
I really want to educate myself more on making informed decisions. Iāve made a few mistakes but nothing too dramatic. I learn from mistakes so in the end Iām glad I made them.
Iām mainly ETF with my consistent portfolio but do hold more single stocks that I actually want right now. Again trial and error. I like single stocks but not quite as many as I hold. Less is more and I broke my own rule recently. Quite annoying. The tech bubble enticed me. Thankfully itās PayPal and the larger companies that wonāt simply just vanish. Still Iāll most likely have to average down.
For example purposes I added a photo on Netflix chart. RSI and SMA set at 50 day. The thereās various indicators to choose from. How do you decide which are the better ones to work off?
For your company DD do you use the sites I mentioned above or tend to look elsewhere for your info?
I find Simply Wall Street really good for analysis but donāt pay a fee so thereās only so much I can see.
I mainly use the following.
If I donāt know anything about the company then first Yahoo or some other site with financials on then.
I quite like Tikr to compare financials in a specific sector. Eg. EV/EBITDA.
I also use TradingView to search for companies fitting criteria you want and then research those.
I usually then search for news on the company to gauge if anything has gone well or wrong recently.
For me the main source of information on any company is their RNSs and the company accounts, the annual reports are VERY useful.
Iām very much the same with work and family etc, hence the indexās for me.
Donāt worry about the mistakes, itās all a learning curve just hopefully it doesnāt cost too much money . Itās tricky because you learn a lot about yourself investing as well. Iāve learnt my risk tolerance is pants and Iām not good at following the crowd (I knew this one anyway in fairness). If I rush into an investment I can rush out of it too. So my trading history for the first few months was horrific. Whereas now itās extremely minimal.
Youāre not alone in that one either, the odds are if it goes up fast, itāll come down fast too. I got in Paypal pretty early but when it got to near 300 I sold it as it became far to expensive.
Again, Im probably not the best to answer. But I would say there isnāt a right answer and itās all about context. Iād watch some videos on the MACD as well. I would say the technical analysis is more of a trading tool in some ways, thatās why itās secondary to me.
I subscribe to simply Wall Street, use yahoo, cnbc, Bloomberg etc etc. Itās always good to check these if you see an indicator looking a bit out there.
Youāll tel from Equityās posts heās a lot more proficient than me for balance sheets etc.
Iām learning on these and recommend Money Week on YouTube. Heās nothing flash and stick to the facts and doesnāt entice silly growth stocks. Very much a fundamental kind of guy.
Iāve only been in since August but Iām now taking it really slow and reading lots of books etc
Hope Iām okay to ask another question - Iāve been looking into a stocks finances Zillow Group in this instance.
The debt is lower than the equity - am I looking at the right thing? So therefore the risk is lower? If the debt is higher than the equity itās probably a red flagā¦
The risk in terms of debt would be lower than for a company with much higher debt compared to the equity, yes.
For normal, typical companies, not high growth tech with no revenue (havenāt come up with anything for those), I personally like to look at two measures:
On one hand, how much total debt does the company have compared to its tangible assets.
So for the debt I add current liabilities and non-current liabilities and for the assets I look at total assets and subtract those that are intangible, and canāt really be sold in my opinion. Intangible assets tends to be listed as an item, if not then I look for items such as āgoodwillā or brand or things like that, and subtract those from the assets, to get some kind of ātotal tangible assetsā (just to give it a name).
My preferred number would be liabilities to be less than half of these total tangible assets, but in the current environment of low interest rates there arent that many companies that meet it, but at least its a ratio or percentage that I keep in mind.
I look at the ratio between the ānet debtā (total debt minus cash or cash equivalents) and the EBITDA of a company. This typically should be below 3 for most banks to lend at a reasonably low interest, although I dont remember where I read this. A youtuber, Cameron Stewart also uses it, so it must be a pretty common ratio, nonetheless I read it in a paper or book somewhere.
EBITDA is Earnings Before Interests, Taxes, Depreciation and Amortization. Itās stated quite frequently, if not you can calclate it. I find that some companies, particularly those with very low Depreciation and Amortization just state EBIT.
Note for number 2, although perhaps a bit more work and a bit more complicated:
If you want to actually include market value of the company and how it compares to other similar companies you could look at Earned Value to EBITDA ratio and compare it to similar companies. Earned Value is the āTotal Debt + Market Capitalisation - Cashā.
What do other people compare debt against or what ratios do you use?
Yikes thank you for that. I wish I could have a sit down seminar with you for a week!
It will take me some time to figure out what you say as Iām definitely still a newbie. Thank heavens itās written down so I can re-read it as much as I need to.
Yahoo finance is brilliant for all the above as itās got a full break down of everything so thankfully thatās all in once place. So Iāve a starting point and Iāve the pieces of info above to start slotting the pieces together.
Iām definitely confused right now but hope in time I can figure it all out
I am not really an expert. I had a basic financially basis that I have been building on, like you, doing some research, but I also have a lot to learn. When I come across an idea that I feel make sense to my way of investing or evaluating companies I try it out, see if I like it and continue using it.
So, I would not be surprised if other people on here had better methods of evaluating company debt. I am quite interested in comparing views.
Following on from the few messages above regarding trying to understand and to learn a specific companies finances (debts / equities) which I now use yahoo finance a lot and itās been great.
I wondered does anyone then use the Firm Foundation Theory? Working out the intrinsic value of a stock and then applying a margin of safety? Iāve been far too flighty recently with some tech stocks and itās been a great wake up call that I need to learn more solid ways of investing if I want to be occasionally more active than just with my passive funds.
Iāve only just been introduced to it. Was curious is it a tool you commonly use to work out what SP youāre willing to hold for?
Or do you use the Castle in the sky theory? Seems like with Gamestop and AMC this is a theory being commonly used.
I too have used it and made some money but itās not something Iād risk much money on or feel confident to use for a healthy portfolio.
After reading about the tulip bulb craze - itās uncanny in the tech market at the moment. Itās history repeating itself.
As always I enjoy hearing your opinions on strategies.
I always have a margin of safety, history is useful. We are creatures of habit, fashion comes in and out, the universe is full of cycles, patterns repeat. Illuminati.
. Itās tricky because you learn a lot about yourself investing as well. Iāve learnt my risk tolerance is pants and Iām not good at following the crowd (I knew this one anyway in fairness). If I rush into an investment I can rush out of it too. So my trading history for the first few months was horrific. Whereas now itās extremely minimal.
