Sign Up For My FREE Investing For Beginners Course and Finally Beat The Market and Be Profitable! Click Here http://derrickhorvath.com/youtube Follow these 3 steps and pick winning stocks every time you invest. Picking winning stocks is actually pretty easy All you have to do, is follow three simple steps... TEXT Slide: Step 1 Understand the business The first step is to understand the company you are investing in. I know, this should be obvious, but how many times have you bought a stock based on a recommendation from a friend or worse a television show? Or maybe you even purchased a stock because it was a way to balance your portfolio? The less you know about the company you are buying, the better your odds are of picking a losing stock. And when I pick a company to invest in, I certainly don't want to lose. So do some homework and understand the business. Text Slide: What Should You Know? Here are four financial metrics you should definitely understand: Text slide: 1. The source of Revenue Number one, The Source of Revenue Or Source of Sales. What products or services are driving a majority of the revenue for your company? Is the growth of this revenue sustainable? Can your company produce better products that will sell even better than prior versions? Text Slide: 2. Gross margin percentage. Number 2, Gross margin percentage. You need to understand the company's gross margin percentage. Ideally, you'd like your company to increase their gross margin percentage over time. You would also like your company to either have a similar or better percentage than the competition. Text Slide: 3. Net income as a percentage of gross margin. Number 3, Net income as a percentage of gross margin. This is basically an expression of a company's overhead costs. All the costs of doing business that don't relate to the production of inventory can be summed up in this percentage. Just like gross margin percentage we want this percentage to increase over time and be competitive in their industry. Text Slide: 4. Share count. Share Count. Most investors don't even look at share count, but it is so important. You need to know if your company has been increasing its share count or decreasing the share count. The reason this is important is because you are buying shares, so you want to know if the company will be diluting your shares by issuing more to the public, or they will increase the value of your shares by buying back shares from the public. There are many other financial metrics we need to understand but those are the one's that will get you closer to making better investing decisions. Text slide: Step 2 Know the value You need to know the value of the stock you are buying. Text overlay: Value is NOT the same as price. And value is not the same as price. Text Slide: So what is Value? Think of value as a measure of what a stock is worth to you over time. There is no right or wrong way to calculate fair value, which is why each value investor has their own way of calculating value. The important thing is that you figure out how to calculate fair value in a way that makes you comfortable. And that you do it every time before you ever buy a stock. Because If you haven't gone through the exercise of calculating value, then you're really not investing you're speculating. Text Slide: The Value Investors Daily Method After over decade in the Finance Industry I have developed my own proprietary formula for calculating fair value, it's incredibly accurate, and here's a hint, we use all the numbers from step 1. Text Slide: Step 3 Margin of Safety Now that you understand the company and know the value you need to buy shares when the price is much lower than the value you calculated. That's buying with a margin of safety. B-Roll: Screen Capture of google spreadsheet margin of safety calculation. It's called a margin of safety because it gives you a safety net in case the calculations you did in step number 2 don't turn out as you planned. This final step will test your patience. Not every stock you want will be priced for you to buy, but patience is the key to investing in the stock market. At some point the market will panic and that's when you will take advantage and buy a great company at a great price. Text: The Bottom Line Text Overlay: Understanding the company, Calculating Fair Value, Buying with a margin of safety So let's recap. Picking winning stocks is all about understanding the company, calculating fair value and buying with a margin of safety. Pretty simple right? B-Roll: Staples Easy Button drop So get out there, find a stock you like, follow these three steps and enjoy your winner.
Visibility: 10889
Duration: 3m 30s
Rating: 67