He says that investment financial industry is great for the industry's companies, but not so much for individuals. Investing mistakes we make are:
- We gamble, not invest,
- We do not buy a company because we say it is too expensive,
- We sell a stock too early,
- We do not buy because you are waiting for a pull back,
- We keep your losers for too long and
- We look for where a stock has been and this is irrelevant.
He likes companies that can go up 3 to 4% per quarter. Diedrich Coffee (NASDAQ-DDRX) went up from $1 to $32.75, which was the full price at takeover. The best sources for investment ideas are the annual information forms. Read everything on a company you want to invest in.
Computer Modelling Group (TSX-CMG)'s dividends start out at $0.1 and are now $0.16. WaterFurnace Renewable Energy (TSX-WFI) started out with a dividend of $0.07 per share and its dividend today is $0.24 today.
Stantec Inc. (TSX-STN) has started to pay dividends. It is a good company and the initial dividend gives are very significant statement. Peter says that the management is good. The company has a history of problem solving. It motivates it staff with a balance of shares, salary and options.
(I follow all these stocks of Computer Modelling Group (TSX-CMG), WaterFurnace Renewable Energy (TSX-WFI) and Stantec Inc. (TSX-STN) on my website).
For signs of a good company you should look for
- Management who have started and grown companies before
- Tech edge
- Low cost producer
- Into new markets
- With a new services
- Big brother relationship (i.e. has a parent company to help them)
- Market share
- R&D expenses
- Drives costs lower
- Acquires competitors
- Access to capital
- Cash flow positive
- Has earnings
- Has partnerships
- Has expansion plans and have enough working capital for its needs
- When valuing a company, subtract its cash per share from the share price. If a stock is at $20 and the company has cash per share of $10, then you are really only paying $10 per share.
- Clean accounting
- Good auditors
- Companies that do not over promise
- Companies that deal with their problems
- Companies that communicate
- Annual report has goals, does the company mean them?
- Is company growing better than others in industry?
- Are they making money with that growth?
- Barriers to entry in company's market?
- What size is the company's market?
- Is their market cyclical or seasonal?
Look at Calian Technologies Ltd (TSX-CTY) where company is growing its dividend, the P/E is 10 and company has $4 in cash per share. (I follow this stock).
- Strong Industry and growing company
- Competitor edge
- Keeps its advantage
- Well financed
- Able to communicate to investors
- Good Management
- Attractive value
- This equals a worthwhile investment
Lessons from the experts would be: Pull the weeds: water the flowers. In other words, sell the losers and keep the good companies. A good company is rewarded with rising price/market cap and gets more attention. Look for blue skies. Bay Street analysts are conservative. Don't dream, but know the upside. You should ignore target prices. This is the worst thing of all time.
A diamond is still a diamond, even if it is in the garbage. If others do not like a company, it doesn't mean it is not good. Buy companies with:
- High growth
- Low multiple - can have massive margin expansion
- Rapid EPS acceleration
- Operation profit surge due to cost cutting
- High multiples
- Defensive growth
- Companies with excess cash
- May not get market/multiple expansion
- Market share growth/monopolies
- Merger candidates
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.