How I Analyse and Invest
Thank you @nimrod22 for the suggestion. I figure this would be a good time to talk about the steps I take when looking for an investment, and how I analyse any stocks or ETFs which get suggested.
I have also cleaned up the first post to include quick links to each analysis piece, also to provide some timestamps against my views in aggregate!
Screening and Discovery
When I’m not getting suggestions from the kind commentators on here, I have a few go-to places to find trade ideas.
News Sources
I find Business Insider useful for a summary on the markets in a macro sense as well as anything exciting happening right now.
Additionally, I check out the daily Finimize email. I like these guys in terms of bite-sized news stories. This is more “water-cooler” talk.
Stock and Fund Screeners
If I am looking for a dividend or raw datapoint, then I like the stock screener on Wallmine. Easy enough to use if you are looking for high dividend yield companies to investigate.
When searching for new investment ideas I use Genuine Impact. I tend to look for high-quality companies with strong momentum that does not have a low-value rank.
I’ve also used Simply Wall St for investment ideas but I prefer the rankings over the checklist approach. I find these guys are a merge of Genuine Impact and Wallmine, but I like to reference them from time to time.
If I am looking for an ETF and want to slice and dice my options more I like to use JustETF and their screener. A nice way to find an ETF with a particular focus to then investigate.
Get The Summary
When I know what stock or fund I want to investigate my first check is a health check with Genuine Impact. Normally I’ve checked out the top factors (the free stuff) and I am looking into the details now.
First I checkout profitability, a poor rank here normally means they aren’t profitable yet. I then assess the expected returns, I want this rank to be as close to #1 as possible. High target share prices are very attractive to me. Expected growth of revenue and earnings is also attractive but I often find this is priced in, still a good reference point.
A quick check on dividend yield to see if there is one or not, not too influential to my process but may change when I invest (I’ll have to look for the ex-date.) The rating change is important to me, knowing if sell-side analysts are changing their view a sign of what is happening in the immediate term. Having no buy ratings, or overwhelming sell rating is a massive red flag for me.
Understand The Company
Next up is figuring out what the company does and why. Easy way to find this is a Google search for “company name investor relations” this should take you to the investor site for that company.
I am looking for a few key documents. Reports and documents (I like the powerpoints to get a nice summary of what is happening.) Events calendar which shows dividend timings and when the earnings are announced. Tools like Genuine Impact, Simply Wall St, and Wallmine are using the fundamental data from the last report. If the last report wasn’t for a while then (e.g. due soon) I will often hold off any decisions until there is more clarity.
Additionally, I like to look for the strategic vision or anything which details their longer-term plan. I want to see future investment or innovation. Situations, where they are not innovating, or assume they will keep market share, with no consideration for new disrupters, is also a red flag.
Full Year Earnings
This is a key document for me. After looking through the high-level PowerPoint (which simply paints the best possible picture) it’s time to dive into the last full-year earnings release.
Most of my time will be spent reading through this document. There is a lot of fluff, but also a lot of warnings and expectation management. Was does this document mean for the future.
You can read through the full financials if you are an account but I find them very boring. Rather this is where I move over to Wallmine to checkout the ratios and headline financial figures. You can get the same data on Yahoo Finance but I find the interface and experience way nicer on Wallmine.
I’m looking for the ratios behind the summary rankings. What is the profitability, is it growing, do they have strong cashflow, are they taking on more debt than they can handle. Is this a high revenue, high-growth investment?
Latest News and Views
At this point, I should have a feeling if this company is as good as the first few health checks and screeners said it was.
Now it’s time to understand what is happening for this company right now, and also to get more detail sell-side analyst views - in particular target price.
First I search Google News for “company name share price”. I am looking for financial pieces related to the company. By adding share price it filters out a lot of random comments and stories which don’t impact my investment. If I do make an investment and it’s a company I wouldn’t naturally be keeping up with, then I also set up a Google Alert for that search query (pro-tip, setup some email filters as the subject lines are predictable, then you have an easy reference point for your investment daily news.)
Finally, I want to check out the sell-side analysts for a target and to double-check the coverage. I use Marketbeat for this. Wallmine does analyst coverage for US stocks by for UK stocks I use Marketbeat. I’m not a fan of the site interface and find it annoying but it gives me the data I need.
The Missing Bits
What I haven’t covered is portfolio construction, allocation monitoring, trading timing, and when I decide to exit an investment. For right now this is how I find and then analyse a potential investment.
The idea is to have a broad first bucket and then filter out stocks and funds as the process becomes more time-intensive.
Hopefully, you’ll see a few new tools, or suggest some tweaks or new tools for me!
Bit of a break from security analysis but I’m keen to pick up another stock/fund tomorrow. I’ll have a look through the suggestions or checkout any recent earnings for an interesting new company.
Thanks again for reading and I’m looking forward to your comments!