How do you evaluate your stock picks?

[Mani]

Just curious… other than the common analysis (PE ratios, financials etc) how do you evaluate your stock picks? Is there a reference site of some sort? Do you use one of the many scoring systems out there?

Lets share our approaches in this thread… I’m pretty new to investing so I’m developing as I go. I’m doing all the conventional things so far but, as I said, I’m curious to know what else is out there…

Cheers!

[deathwaltz]

Welcome to the community!

RE: reference site, “SimplyWallStreet” is a decent place to start, but I feel like soon enough people ‘grow’ out of it and it becomes more useful for the RAW data than anything else, with the analysis being done yourself (e.g. forecasts).

Anyway, here’s my process:

Screen:

• Profitability
• High returns
• History of growth
• Industry I know (i.e. within my ‘circle of competence’)

Analysis:

• Runway for growth (e.g. untapped markets)
• Sustainable competitive advantage (moat)
• Financials (balance sheet, income and cash flow statements, etc)

Deciding to open position

• Low P/E or P/B (if cyclical) in historic or relative terms
• If too expensive, pop it in watchlist and wait until attractive entry point (this can be years!)

Selling

• Ideally never, BUT
• Will sell if I realise I was fundamentally wrong in any of above steps OR
• If the moat is eroded (if the moat disappears so quickly, was it ever a moat to begin with?)