Investing Philosophy And Strategy
The guiding principles of this philosophy are those outlined by the NAIC with some modification. INVESTING PHILOSOPHY AND STRATEGY
To acquire a portfolio of common stocks that will appreciate in value by 100% over five years. This amounts to growth of !5% compounded annually. The guiding principles used are those outlined by the National Association of Investment Clubs.
Invest regularly, regardless of the market. Because the overall market trend for decades has been 10% compounded annually – use market dips to buy.
Reinvest all dividends. This maximizes profits/growth through compounding.
Invest in Growth Companies with excellent management.
Diversify to reduce risk. Diversification will be across those industries that I believe have the most potential for growth. Technology, Telecommunications, Health Care Related industries, Finance & Banking, Aerospace & Defense.
The stock should meet at least 50% of the buy criteria. The purpose of the criteria is to be able to make more informed decisions, thus increasing the likelihood of successful picks.
Industry is ranked in the top third by Value Line.
Value Line Timeliness Rating is 1 or 2. (How fast the stock will grow relative to other stocks.)
Value Line Safety Rating is 1 or 2 (Volatility of a stock’s price around its own long -term trend.)
Total Debt is no more than a third of total assets.
Beta (how volatile the stock is as compared to the total market) between .80 and 1.20.
Past five years and projected growth in sales and earnings are in double digits.
Price/Earnings Ratio is below the average P/E Ratio for at least the last three years.
P/E Ratio of 30 or below.
Current Earnings Per Share (EPS) is 25% greater than the EPS for the same quarter the previous year.
Annual Earnings Per Share has increased each year over a minimum of the past three years.
"Zoning" should be in the "buy" range (lower 1/3 of projected price range).
Upside-Downside Ratio is at least 3 to 1 ( Can the stock be bought at a favorable price where the potential on the Upside is twice the risk on the downside.)
Outstanding Management.
Company has received recent positive press.
Company is expanding its products and services – developing in international markets.
The company shows no potential growth.
The current EPS falls below the EPS for the same quarter in the previous year.
Annual EPS does not follow the growth pattern of the previous three years.
P/E ratio rises above the past three-year average P/E.
P/E ratio rises above 30.
Zoning for stock price rises into the "Sell" range.
Growth rate doesn't reach projected level in one year.
Negative press reports seem to be significant.
Management is unstable or having problems.
Company depends on a single product or customer.
Industry is experiencing a downturn.
Competition becomes too severe.
Re-evaluate if stock has doubled in value from the price at which it was purchased.
