A Mad Lib You Can Use to Pick Stocks???
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A Mad Lib You Can Use to Pick Stocks??? The recent writeup about Abbot Labs done by Manifest Investing (http://www.facebook.com/bivio#!/note.php?note_id=136345636421997) contained this description of how to do a basic stock analysis: "Any stock study is basically a fill-in-the-blanks quiz. If (company name) can grow sales at ____%, achieve a profitability of ___% for net margin, and if a reasonable price-to-earnings ratio (P/E) would be _____x ... then the stock price might grow to ________________ . Therefore the projected annual return (PAR), if I buy it at today's price of _________ would be: _______%." It looks like a Mad Lib, but don't let its simplicity deceive you. With some educated judgments, it can be very effective to structure your thoughts about choosing investments and following stocks you own. Some of the blanks are filled in by making calculations. It's easy to turn the paragraph above into a spreadsheet. Then, all you need to do is make three judgments about a company's fundamentals, sales growth, net margin and future average PE, and a possible future stock price and PAR will be calculated for you. In the recent months Club Meeting Meetings, we've been talking about how to make the three judgments. In November, we discussed how to predict sales growth, in December we talked about net margin and we'll be talking about P/E this month in our webinar on Thursday. You can register to join in at www.bivio.com/club_cafe We're even running a little contest where you can earn a free 1 year bivio subscription. The winner will be the club that comes closes to predicting Apples first quarter 2011 earnings. We've provided you with a spreadsheet that will do the calculations above for you. All you need to do is enter the three judgments. All information needed to participate in the contest is available at www.bivio.com/clubmm It's a chance to practice your skills at being a stock analyst, have some fun in your club doing the activity and learn more about investing in the process! |
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