Lessons From The Motley Fool

Probably the most popular investing and stock market website available. I have learned a tremendous amount during my visits - its hard to take it all in there's so much information. This page gives you an introduction to the "Fool" - what's available and summaries of things I have learned. Sort of the "Cliff Notes for The Motley Fool."

 

The Motley Fool's mission is to educate, amuse and enrich the individual investor. The Fool is founded on a few basic notions:

The best person to manage your money is you.
The key to investment success is doing one's homework - this "homework" can be fun.
If folks work together in a spirit of community and friendship to take control of their finances they can enjoy the fruits that come with the investment of one's money.

Navigating The Fool

At first glance the Fool may be somewhat overwhelming - this is a huge site, with a tremendous amount of information. If you're new to the Fool you might find these navigating tips helpful.

bl_pin.gif (1016 bytes)Welcome for first-time visitors/new Fools:
http://www.fool.com/about/site/Welcome.htm
(Note that at the bottom of this page is a tour of Fooldom that you can take.)

bl_pin.gif (1016 bytes)The 13 Steps to Investing Foolishly: The Creed, of sorts
http://www.fool.com/School/13Steps/13Steps.htm

bl_pin.gif (1016 bytes) Info/Help page, a great reference source:
http://www.fool.com/help/help.htm

bl_pin.gif (1016 bytes) The  main areas in Fooldom.  Included are the URLs for these pages, but you can best reach any of them using the tab structure at the top of the pages. (Imagine a bunch of manila folders with tabs.)

bl_pin.gif (1016 bytes) Home:  http://www.fool.com  The main page, which highlights some of the day's week's most interesting material.

bl_pin.gif (1016 bytes) Money: Offering info and tips on personal finance issues, like getting out
of credit card debt, paying for college, buying a car or house or insurance,
planning for retirement, etc.: http://www.fool.com/money.htm

bl_pin.gif (1016 bytes) School: Offering information on how to value stocks, the 13 Steps, the Dow Dividend (Beating the Dow, Foolish Four) Approach, Drip investing, brokerages, etc. : http://www.fool.com/school.htm

bl_pin.gif (1016 bytes)Portfolios: Where you'll find  real-money portfolios. These were funded
with actual money and we report on each one's performance 3-5 times a week.
Each portfolio has a different approach (one uses Drips, one is more
aggressive, one focuses on "Cash-Kings", etc.) and all are meant to be
teaching portfolios. It is highly recommended not to copy their portfolios  but to learn why they're doing what they're doing and how they managing these portfolios.  http://www.fool.com/portfolios.htm

bl_pin.gif (1016 bytes) Stock Ideas: Offering  the Daily Double and Trouble -- looks at stocks
that have done well or poorly in recent months. Plus, a weekly "Dueling
Fools" feature dissecting a stock or issue of interest: http://www.fool.com/ideas.htm

bl_pin.gif (1016 bytes) News: The news team offers reports on stocks in the news three times a day:
http://www.fool.com/news.htm Of special interest should be the nightly "Fool
on the Hill" feature article, discussing a stock or industry or other topic.
Some of  the most thoughtful Fools write these and they appear in the Evening News each weeknight.

bl_pin.gif (1016 bytes)Specials: These are occasional special features, such as "Stocks for
Mom," "1998 in Review," "Eyes on the Wise (Confessions of a Broker)," etc.
http://www.fool.com/specials.htm

bl_pin.gif (1016 bytes) Info/Help: http://www.fool.com/help/help.htm

bl_pin.gif (1016 bytes) Community/Messages:  A very rich message board area, with thousands of boards on thousands of companies and topics.  http://boards.fool.com/

bl_pin.gif (1016 bytes) Quotes/Data: Where you can research a stock: http://quote.fool.com/

bl_pin.gif (1016 bytes) My Portfolio: (You'll need to register for  to use this, but once
you do, it'll let you set up portfolios to monitor. All free.)
http://boards.fool.com/portfolios/

bl_pin.gif (1016 bytes) My Fool (you have to register for this but once you do, it presents your
favorite Fool features/message boards in one place -- that you can bookmark.

bl_pin.gif (1016 bytes) FoolMart:   The online store: http://www.foolmart.com

bl_pin.gif (1016 bytes) To register - which is free -- just head to:
http://www.fool.com/community/register/register.asp
By registering, you'll receive alerts when some Fools are speaking near
you, or when their radio show or newspaper feature starts in your neighborhood.   You'll get some special offers/discounts, too.

 

FoolWire

The Motley Fool's FoolWire offers an educational and informative look at the day's stories about public-traded companies. The goal of each Fool News story is not just to tell you what happened, but to go deeper and say why it happened and what might happen next as a result. Designed to educate and inform, FoolWire is an invaluable part of any investor's search to figure out why stocks have moved in price and whether or not the move represents an investment opportunity.

FoolWire is culled from the Motley Fool's Lunchtime, Evening NewsFeatures and Conference Call Synopses each day.

 

FoolSchool

The 13 Steps to Investing Foolishly keep you smiling through subjects such as opening a brokerage account and investing for growth. In the Fool School, the you are guided through courses like How to Value Stocks and the Dow Dividend Approach. The Foolish investment strategy is reflected in the Gardners' portfolio of traditional Dow stocks with high-tech holdings for growth. Enjoy!

 

The Lessons (just my notes) or What The Fool Taught Me

Price-To-Sales Ratio
Young growing companies often do not have a history of earnings - earnings are what's commonly used to evaluate a company. If there are no earnings - you can use the PSR. This ratio takes the market capitalization of a company and divides it by the last 12 mo. revenues. The market capitalization is the current value that the market is giving the company - you multiply the current share price by the number of shares outstanding.
If a company has 10 million shares outstanding, at $10 a share, then its market cap. is $100 million. If it had $200 million in sales over the last 4 qtrs., its PSR would be 0.50 ($100 million divided by $200 million equals 0.50)
You are measuring how much you are paying for a dollar of sales instead of a dollar of earnings (the P/E ratio). Remember sales growth is great, revenues must be transformed into rising earnings - how much a company earns off its sales will eventually drive up the values of the stock.

Liquidity - It refers to the market's ability to handle a large volume of trading without significant price swings if you're discussing a stock. With companies it refers to their cash and assets that can be quickly converted into cash. Companies with high liquidity or less risky, but they might also grow slowly as assets that could be put to work increasing sales are instead kept easily available.

Finding out if a company is overvalued or undervalued - use the YPEG - a year ahead price/earnings-to-growth rate ratio. This doesn't work for small, young companies, as their future earnings are less predictable. Example - next yrs. earnings per share estimate of $3.74 - multiply it by the expected five-yr. annual growth rate of 15%, This gives you a YPEG fair value of $56.10 - the company trades around $45 per share, this suggests its an undervalued company.

  Other factors to look at when two companies your studying both have a record of strong sales and earings - turn to the balance sheet:   If inventory levels or accounts receivable are outgrowing sales, in percentages this is a red flag.  You also don't want to see the company taking on huge levels of long-term debt.  Examine the statement of cash flows to see how most of a company's cash is being generated - you want to see most cash coming from on-going operations (what they sell and make) - you don't want to see cash coming from the company issuing stock or debt.  Look at the margins - operating, net, and gross margins.  Higher gross margins can suggest the company has a proprietary brand or technology.  This usually indicates a higher quality company, with pricing power in its markets and the ability to hold down manufacturing costs. 

 

More "Fool Notes" will be posted
as I learn additional concepts.