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THE PEANUT PRIMER |
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by
Chuck54
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Sir Head Peanut's Guide to Submitting Stocks for Analysis
AKA--AMA Preliminaries for Dummies (like me!)
AKA--AMA Step by Step Help for the Math and Statistical impaired
(definitely me!)
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First,
congratulations! Just by making it this far means you're now an official member of
the AMA Peanut Gallery! Here's your bag of peanuts and a Coke. Relax and
enjoy. |
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Step 1
You gotta find a stock. Click on the Quotes/Data tab towards the top of the AMA
page. It's between Messages and My Portfolio. At this page if you know the stock
ticker symbol you want, enter it in the box to the right of the words Company
Information On
. It's towards the top of the page. Make sure you
backspace over enter symbol(s) first. Click
go! If you don't know the ticker symbol, enter the company's name
in the Lookup section. If you only know part of the company's name go
ahead and enter that. For example, let's use cola. When you find
the company you want, in this case Coca-Cola; click on the ticker symbol
KO. You should now be at the simple section of the
Quotes/Data page.
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Step 2
Click on the Estimates tab and the first item under
COCA COLA CO will be Estimated Long-Term Annual Growth:14.58
that's the number we want. Write it down for #1 - Long Term Growth Rate. |
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Step 3
Click on the Financials tab and you should see the
SEC Filings for KO. In the Revenue section find the last complete year listed
in the Total line. In this case it's 1998, 18.813
billion. Write that down for #4. I know it's out of order but you'll be
OK. |
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Step 4
Click on the Snapshot tab and you'll get a lot more
information. DON'T PANIC! You don't need to know all this stuff yet, I sure
don't! All right now, take a deep breath, have a sip of Coke, eat a few peanuts, go
for a little walk if you need to. OK now? Feeling better? Let's
go! Scroll down to Dividend Information. Here you'll find
Payout Ratio (TTM)%. Our number is *41.99. Write that
down for #2. You're doing great! |
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Step 5
Find the Mgmt Effectiveness section. Here
you'll find Return on Equity (TTM). Our number is
*45.89. Write that down for #3. |
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Step 6
Find the Financial Strength section. Here
you'll find Total Debt/Equity (MRQ). Our number is
*0.59. Write that down for #5. |
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Step 7
Find the Valuation Ratios section. Here you'll
find Price/Earnings (TTM). Our number is *45.14. Write
that down to use in our Real PE calculation. |
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Step 8
Calculate the Real PE by dividing #7, the P/E, *45.14
by #3, the ROE, *45.89. Or, 45.14 / 45.89. You should get .98365657. .98 is
fine. Note: If your company is a financial company, like AIG, double the ROE before
dividing it into the PE, or, PE/(ROEx2). For example, if KO was a financial co.
(which it's not) it's RealPE would be 45.14 divided by (45.89 x 2), or, 45.14/91.78 =
.49. If your company is a mixture of financial and other stuff, like GE, multiply by
1.5, or PE/(ROEx1.5). |
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Step 9 |
Compare your information to our AMA standards for submission.
(See Last thing below). |
Results for
KO |
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1) We need a minimum long term
growth rate of 10%. We've got 14.58%. Good, keep going! |
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2) We need a payout ratio of
less than 50%. We've got 41.99%. Good, keep going! |
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3) We need a return on equity of
at least 15%. We've got 45.89%. Very good, keep going! |
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4) We need sales of at least $1
billion per year. We've got 18.813 billion. Great, keep going! |
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5) We need total debt to be less
than 2 times total book value. We've got 0.59. Now 0.59 is a ratio that needs
to be under 2 (don't ask me I'm just a PEanut Head). 0.59 < 2. Good, keep
going! |
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6) We need at least a twenty
year history. On the "snapshot" page below "Officers" you'll see
that KO was incorporated in 1919. We've got 80+ years. Great, keep
going! (If your company's incorporation date isn't here then you may need to call
their shareholders information number, or go to your company's website for the date.
Or follow Disney Dan's info sheet.
Thanks Disney Dan!) |
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7) We need a RealPE <
.66. We've got .98. Ooops KO doesn't qualify right now. Sorry!
--NOTE: This number may be lowered if we find enough acceptable stocks. It
would apprear the Buffett makes his purchases when the RealPE is at or below .66. |
Last Thing |
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Check the latest criteria and candidates list. Look to
see if your stock is on the list. If not, follow the rest of the directions from
there and you should be good to go! Note that the criteria may have changed a little
since this was written, sorry! But if you've gone this far then the good folks at
AMA will probably help you from here. |
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* Note that the numbers
used here were obtained on 3/7/99. Your numbers will be different when you do KO,
hopefully BETTER! Good luck to
you in all your investing!
I hope this helped you.
Chuck
Sir Head PEanut
Thanks to Le Patriarche, Pam, rlds70, RodO,
DisneyDan, applg8, Mycroft, and of course The PEanut Gallery! |
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