By:
On:
In: Commentary
With: 0 Comments

ID-100216631We all want to get the best price to buy stock. We probably try to get the best price for everything that we buy!

Perhaps your research has shown that a company is an excellent purchase, but you can do a bit more analysis to get the best price to buy stock. You do not have to do this work. Your existing analysis has led you to conclude this is a valuable company and should increase in value over time. However, with any company, the stock will go up and down without seeming to reflect the true value of the company. You can take advantage of these market swings to increase your profit potential by finding the best price to buy stock. Effectively, you want to buy the stock at a discount if you possibly can do so.

This technique is the foundation of GOPM (Grow on Other People’s Money)! If you buy a full position in this promising company, then you are employing a pure “buy and hold” strategy. To maximize your profit, you can buy at a bit of a discount and then when the time is correct, let your investment grow while preserving your capital.

The goal is to allow you to manage your money more prudently. You want to invest your money in this company when the price is going up. When the price is flat or moving down, though, you need to to have your money in another company that is moving up. By avoiding the natural downturns in the market, you will maximize your profits.

If you look at any company’s stock price chart, you will see the price go up and then back down. What is the best price to buy stock? Would it not be better if you bought when it was in the valley than when it was on top of the mountain? Don’t you think that the price at the bottom of a valley is the best price to buy stock as opposed to buying at the top of the mountain? Yes, you know that the current price is favorable compared to what it will do in the future, but the markets are not entirely objective, you need to take into account the natural motion of the market. In short, you want to pay the least you can for the company.

To do this, you will use the tools of a technical trader. There are investors in the market that do not care about the quality of the company at all. They use a set of mathematical tools to figure out if the price of the stock is going up in the short term or down in the short term. They buy or sell accordingly.

You do not want to be a pure technical trader. You only want to invest in the quality companies such as those identified on my Watch List, but you also want to use the technical trader tools to get the best price to buy stock.

Many articles or books will advise you against market timing. This is foolish. For most things that you buy, you look for a better price. When you buy a new shirt, you wait for it to go on sale. When you bought your car, you waited for the best rebate and probably went to several dealers to play one against the other. After Thanksgiving, you got up at 5AM to take advantage of the many sales. You went out the day after Christmas in search of bargains. In fact, some retailers even make promises that if you buy from them, they will guarantee the price for a certain number of days.

If you look for a bargain for everything else that you buy, why would you not look for a bargain in your investments? This is how you will use technical indicators, to try to get a bargain. You will not use indicators to blindly drive your investment behavior. Your goal should be to find the best price to buy stock so that your investment return is maximized.

If the adage for investing is “buy low and sell high” then it is perfectly logical to look for the best price to buy stock. My book, The Confident Investor, will help you to accomplish this goal. You can purchase my book wherever books are sold such as Amazon, Barnes and Noble, and Books A Million. It is available in e-book formats for Nook, Kindle, and iPad.

Image courtesy of vectorolie at FreeDigitalPhotos.net

By:
On:
In: Fair company, Stock analysis
Tagged:
With: 0 Comments

Company name Six Flags Entertainment Corp
Stock ticker SIX
Live stock price [stckqut]SIX[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Poor
Sales growth Poor
EPS growth Good
P/E growth Good
EBIT growth Good

ANALYSIS

Confident Investor Rating Fair
Target stock price (TWCA growth scenario) $57.29
Target stock price (averages with growth) $12.2
Target stock price (averages with no growth) $3.7
Target stock price (manual assumptions) $41.67

The following company description is from Google Finance: http://www.google.com/finance?q=six

Six Flags Entertainment Corporation (Six Flags), incorporated on December 09, 1997, owns and operates regional theme, water and zoological parks. As of the December 31, 2011, of the 18 parks the Company owned or operated, 16 are located in the United States, one is located in Mexico City, Mexico and one is located in Montreal, Canada. Its diversified portfolio of North American theme parks serves an aggregate population of approximately 100 million people and 160 million people within a radius of 50 miles and 100 miles, respectively, with some of the highest per capita gross domestic product in the United States. During the year ended December 31, 2012, the Company’s parks offered approximately 800 rides, including over 120 roller coasters, making the Company the provider of thrill rides in the industry.

 

Confident Investor comments: At this time, I think that a Confident Investor can cautiously invest in Six Flags Entertainment Corp as long as the price is correct. Most of the fundamentals of this company are good but there are some concerns.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

For owners of my book, “The Confident Investor” I offer the following analysis (you must be logged in to this site as a book owner in order to see the following analysis). If you have registered and cannot see the balance of this article, make sure you are logged in and refresh your browser.
[s2If current_user_can(s2member_level1)]
In order to assist you in using the techniques of this book, the values that I used when calculating the Manual pricing above were:

Stock price at the time of the calculation: $37.02

Growth: 0.12

Current EPS (TTM): $2.38

P/E: 16

Future EPS Calc: $4.19

Future Stock Price Calc: $67.1

Target stock price: $41.67

I hope that this makes you a better investor. [/s2If]

By:
On:
In: Fair company, Stock analysis
Tagged:
With: 0 Comments

Company name Verisign, Inc.
Stock ticker VRSN
Live stock price [stckqut]VRSN[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Poor
EPS growth Good
P/E growth Poor
EBIT growth Good

ANALYSIS

Confident Investor Rating Fair
Target stock price (TWCA growth scenario) $95.08
Target stock price (averages with growth) $114.46
Target stock price (averages with no growth) $81.59
Target stock price (manual assumptions) $79.58

The following company description is from Google Finance: http://www.google.com/finance?q=vrsn

VeriSign, Inc. (VeriSign) is a provider of Internet infrastructure services. The Company provides network confidence and availability for mission-critical Internet services, such as domain name registry services and infrastructure assurance services. Its service capabilities enable real-time name resolution for a number of global top level domains (TLDs), enable domain name registration through registrars, and provide security intelligence and cloud-based network availability services to enterprise customers. It has one reportable segment is Naming Services, which consists of Registry Services and Network Intelligence and Availability (NIA) Services. It has operations inside as well as outside the United States (U.S.). Registry Services operates the authoritative directory of all .com, .net, .cc, .tv, and .name domain names and the back-end systems for all .gov, .jobs and .edu domain names.

 

Confident Investor comments: At this time, I think that a Confident Investor can cautiously invest in Verisign, Inc. as long as the price is correct. Most of the fundamentals of this company are good but there are some concerns.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

For owners of my book, “The Confident Investor” I offer the following analysis (you must be logged in to this site as a book owner in order to see the following analysis). If you have registered and cannot see the balance of this article, make sure you are logged in and refresh your browser.
[s2If current_user_can(s2member_level1)]
In order to assist you in using the techniques of this book, the values that I used when calculating the Manual pricing above were:

Stock price at the time of the calculation: $61.45

Growth: 0.16

Current EPS (TTM): $2.26

P/E: 27

Future EPS Calc: $4.74

Future Stock Price Calc: $128.16

Target stock price: $79.57

I hope that this makes you a better investor. [/s2If]

By:
On:
In: Poor company, Stock analysis
Tagged:
With: 0 Comments

Company name GFI Group Inc.
Stock ticker GFIG
Live stock price [stckqut]GFIG[/stckqut]
Confident Investor Rating Poor

The following company description is from Google Finance: http://www.google.com/finance?q=gfig

GFI Group Inc. (GFI) is a provider of wholesale brokerage services, clearing services and electronic execution and trading support products for global financial markets. The Company provides brokerage and trade execution services, clearing services, market data and trading platform and other software products to institutional customers in markets for a range of fixed income, financial, equity and commodity instruments. The Company provides execution services for its institutional wholesale customers by either matching their trading needs with counterparties having reciprocal interests or directing their orders to an exchange or other trading venue. It offers its customers a hybrid brokerage approach, combining a range of telephonic and electronic trade execution services. The Company operates in four segments: Americas Brokerage; Europe, the Middle East and Africa (EMEA) Brokerage; Asia Brokerage, and Clearing and Backed Trading.
Confident Investor comments: At this price and at this time, I do not think that a Confident Investor can confidently invest in GFI Group Inc. It is not possible to confidently invest in a company that is not currently profitable.
If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

By:
On:
In: Commentary, Content for book owners
With: 0 Comments
target stock price

target stock priceUsing mathematical analysis to determine the target stock price, we can help to insure a great return on investment. If our analysis shows that target stock price is significantly above today’s stock price, the potential ROI is much better.

My book, The Confident Investor, which is available wherever books are sold, can help you decide the target stock price of a company. This should aid you in earning a profit.

If the target stock price is not high enough compared to today’s price, you may do well to find a different investment with a higher target stock price. Much of this analysis will require concepts that are more fully described in my book. To this end, I am restricting the technique discussion to registered readers. If you haven’t read my book, The Confident Investor, then you may not understand how to find the target stock price. In fact, if you haven’t purchased the book and registered here on this site as a book owner then you won’t be able to see this example. If you have registered and cannot see the balance of this article, make sure you are logged in and refresh your browser.

[s2If current_user_can(s2member_level1)] A quick example will make this calculation easier to understand. Let’s pretend that you found a company that has a TWCA of 13%. You know that the company is growing fast enough to achieve your 10% minimum target. Also, pretend the company has an EPS of 6 and a P/E of 20.

Without even looking up the company, you know that P/E multiplied by EPS will give the current stock price, which is $120. The first check is to calculate the Future Value of the EPS in 5 years. Using the format prevalent in most spreadsheets, this would be typed in as: =FV(13%,5,,-6). This gives you an EPS of $11.05.

Assume the P/E growth is stagnant for the next 5 years. This means that the company will have a price per share of 20 times $11.05 or $221.00 (or $221.09 if you use a spreadsheet and do not round the numbers).

Now, you must find out what the price of a stock is today that could grow to $221 at the minimum acceptable growth rate of 10%. You can find the Present Value of that stock price with: =PV(10%,5,,-221.09) which is $137.28.

Based on this calculation, you know the company might grow from $120 per share to $137.28 and still deliver a 10% return on your long-term investment! Therefore, in addition to your desired growth, you are buying this company on sale for a discount of $17.28 per share.[/s2If]

You can purchase my book wherever books are sold such as Amazon, Barnes and Noble, and Books A Million. It is available in e-book formats for Nook, Kindle, and iPad.

Image courtesy of Master isolated images at FreeDigitalPhotos.net