Stock Selection/Fundamental Analysis- part 1 collated by xela.hc...

Stock Selection/Fundamental Analysis- part 1
collated by xela.hc

Poster: minoil



Date:19/03/16
Time:11:25:54
Post #:17317530

thanks Webby, i'm flattered !!

i think we covered how to find stocks before..........but..........a brief run down on my methods, though its certainly not anything technical.
picking 20-30 roughies out of the AFR...........thin them to 3M MC or less..........low number of shares, low debt, not much activity within the company.
That gets me a short list............

T20..........who's there (most important) who's buying, or, a new appointment to the board any hints of future direction collaborating info with friends/associates liquidity.........not frightened of tight stocks, but will try to assess if its possible to get in, either with small orders to stay under the radar, or a big one to flush out any big holders wanting an exit...........i usually dont worry about liquidity for an exit, as i am primarily going in to wait for an event, which will provide the liquidity (having said that, i have been caught in stocks that wont even let you out at all !)

HC threads.......quite useful to get sentiment, and pick up little scraps of info about company or board etc........saves a lot of google searching............No posts on the thread will prick my ears up.......as will posts by one or two posters only (lonely guys, stuck in a slow moving shell!!)

For the goldies i have traded, it was basically finding ones with a nice little resource, and having the chance to tackle a big holder getting out (GMD, BAR were prime ones).....

so many factors, but its basically research, assembling the clues...........and...........gut instinct is a big factor, trying to predict the future and having the conviction to go in alone...........sometimes it works, sometimes its a disaster ! We all have our methods for stock picking...........my methods would probably horrify some traders, and, i wouldnt know how to pick a TA entry, or assess a company on its financials, or, assess a tech acquisition...........

.we all find our niche, and find other posters who a good at their assessments, and, getting a mix of all that, gives us all a head start on the market..........and...........this is the thread where you find the pick of them (as well as the XSO thread)


Poster: FullMoonFever



Date:19/03/16
Time:23:58:09
Post #:17320144
notewar said: ↑
I really want to get good at trading. Like what most people said at the end of their forum post..."DYOR". I find my self really struggling on this part and dont know where to start. And before i know it, I have put my $$$ into a stock that was up-ramping by several thread on HC which ended-up buying a stock at it's peak price. I dont blame anyone but my self for not doing my own research. So back to the DYOR topic, can anyone give me some guidance on how to do research on a stock or where to start. What procedure do you undertake to identify trends? How do you evaluate if the stock is under/over value? Thank you guys
Click to expand...

@notewar Just logging off but post a couple of things I tend to look for or do.

Announcements - look for key words, related entities, potential clients - names, associated individuals, directors etc. Google search links to these - not full specific sentences but more randomised word linkings to try find more obscure info that mainstream searches may not turn up.
Twitter word searches like the google eg above.
Patent searches (for those needing or lodging patents) - IP Aust, WIPO, USPTO etc Trade shows, exhibitions world wide - is Co. involved (if not, why not?), are competitors?
Obviously some of the links @john435 and others have provided re mining tenement map services. More their forte than mine.
Research the product, the tech, the commodity, the mineral etc to understand what it is the Co. you looking at actually do or are dealing with - who are there competitors (potential or current).
Market - who needs the product, tech, mineral, resource etc....any foreseeable barriers.
Anyway, just some quick ideas.
Have a good one.


Poster: TraderGT



Date:20/03/16
Time:15:08:58
Post #:17321699


Notewar..... You really want to get good at trading?

Firstly i would go a read as much as you can in the "STT knowledge library" - there is also a section about good books which can help. Share trading is like poker.......it takes only a few mins to learn the rules....in this case you can buy a share or sell..... But it takes a lifetime to master (if ever)

When it comes to research it depends on how much free time you have?

For example i have spent 10's of hours on a single stock for researching.
So your a newbie Heres a tip 1. -

You see the stocks all over the DT thread trading high volume and are already up over 100% - DO NOT HIT THE BUY BUTTON......why?

Before you enter you need a plan.... Is it a good entry? Why is it a good entry? Whats your exit plan? Wheres you stop?
If you dont at least have the above then youll unlikely succeed IMO
Ok so back to research Start basic Read asx anns.... How much cash in bank? What are there plans? Is there anything upcoming that could effect the price? Start simple and go from there
You may see stocks going up in the same sector I.E. lithium at the moment....
you can then look up other companies in the same sector that maybe cheaper in comparison and provide value to buy
Just a quick post with some ideas

Hope it helps

Poster: YStrategy



Date:23/03/16
Time:00:32:12
Post #:17341911

Warren Buffett famously said that he could almost guarantee a 50% pa return on $1 million capital.How is this achievable.

You take $600k and put it on a stock that has positive cashflow with no debt and is growing and trades under a ratio of 10.Also the people running the company have to have a large holding in the company.The company will have a market cap under $20 million.

The other $400k in 3 companies similar to your first pick but are the next best 3.

Your high conviction $600k needs to be thoroughly analysed and constantly reviewed you should have say a spreadsheet with 10 different files detailing cashflow,profit,shareholders,revenue detailing everything about the company and do a company visit.Also management is key and they must have a great track record.To take a higher conviction is only possible if you have done your homework and is number dollar homework not of a speculative nature.

How many companies are out there like this very very rare and I would say only 1 or 2 come around every year.

Your entry price is also very important which will affect your return.You have to be ahead of the pack and seize the opportunity.

Remember all companies that go under are due to speculation or debt.

Poster: Freehold



Date:24/03/16
Time:8:21:14
Post #:17358262

On FA Analysis ...
Step one is Start with the Sector review ...
Is it hot or is it not. Is it starting to get increased interest. For example Lithium hot, Gold hot ... Coal Not, Oil interest picking up
If you looking at two stocks one is lithium the other is Coal ... the decision on which to focus on is fairly easy.
Don't waste time with sector that no one cares about unless you plan to sit on a stock for several years before realising a profit. but STT'ers will go with whats hot or starting generate interest

Poster: TheGladiator


Date:24/03/16
Time:20:11:58
Post #:17358853

OK so when I'm analysing a stock there are a number of things that I need to Consider.
1. Market cap
2. Enterprise value
3. Valuation of peers
4. Is it in the right sector
5. How many do directors hold
6. How many do top 20 hold
7. Performance of current directors
8. What are it's upcoming milestones

1. Market cap

Market capitalisation is the market value of a company's shares. This figure is calculated by taking the share price and multiplying it by the total number of shares. it can get a bit tricky deciding whether to use options. Options should be included if they are in the money or close to being in the money. For example, company ABC has a share price of 2c and has 200,000,000 heads (shares) and 10,000,000 options with a strike price of 3c. The market cap is (200,000,000 + 10,000,000) * 0.02 = $4,200,000. If the options had a strike price of 10c though I wouldn't have used them in the calculation.

2. Enterprise Value

I can see sectorlead has already written a great summary. See http://hotcopper.com.au/posts/17358542/single
3. Valuation of peers

When determining whether a company is "cheap" and therefore has more room to run, it's important to see how it's valued compared to its peers who are at a similar point in its life cycle. You should also look at those who are more advanced to see possibly how much room the stock can run if it meets it's objective. As an example let's look at SRT. Based on my research on fintech companies who are making $1m NPAT per year, they have a MC of $100m+. So SRT first performance milestone is $1m NPAT and if the vendors don't achieve this they pretty much get nothing. So SRT currently has a MC of 26 million and will have 1.55 b shares if milestone one is achieved. So 100mil MC = 6.5c. So theoretically srt will minimum 2 bag if milestone 1 is achieved.

4. Is it in the right sector

As I'm writing this I can see others have already written great summaries lol. For sector analysis see freeholds post http://hotcopper.com.au/posts/17358262/single 5. How many do directors hold This is very important as when directors have skin in the game they will be more than likely look after themselves as well as shareholders. So no massive dilutions and being very prudent with company finances. They will also ensure placements go to sticky hands as they wouldn't want to see constant pump and dumps. Very good example is DUO which Peter wall had no shares in and was diluted to hell and back numerous times. Matthew walker though was very smart about it and raised at good prices most of the time to very sticky holders.

6. How many do top 20 hold

The more the top 20 hold the tighter the register. This means there is less free float available of shares which will be sold on market. The less shares available to be sold the easier it is for the share price to run. The people in the top 20 are also important. If you have people in the top 20 who consistently back winners they will more than likely attract other good investors who follow them.

7. Performance of current directors

This is extremely important. We are trusting directors with our money so if they haven't performed in the past what makes you think they will perform in this stock. Mark creasy in the mining game and Matthew walker in the shell game are great examples. Check what companies the directors have worked in and see the share price performance to work out how successful they have been.

8. What are it's upcoming milestones

From a STT perspective we rely on announcements and big milestones to make money. If a company has no big milestones coming up then what will make the share price move up? These milestones are also important in understanding when to time our entries. Depending on our trading strategy you can time your entry. Personally I like to get in 6 weeks earlier than when a milestone is due so there is less competition from other traders.

Remember this is the absolute minimum amount of research I will do to help me shortlist prospective stocks.
Without doing the above as a minimum the risk increases substantially.
Hope this helps.

Poster: minoil


Date:24/03/16
Time:21:02:34
Post #:17359095

FA..........in my case, as i like shell hunting...........
..and, in order, subject to change, and re-interpretation due to many variables

Market Cap............
.i like to stay under 4Mill
Next step, visit a recent quarterly for............ Shares on issue.............200Mill or less is peachy........anything with 1Bill+ usually gets the heave ho...be careful of convertible notes

Cash and debt...........
500k cash seems to be a sweet spot........
No debt is preferable, avoid any large payable debts.........debts to directors need to be examined closely, as they are not necessarily a hindrance
Company activity...........is it persisting with a flogged out project, or is it open to new opportunities

Management...........
are they in for lifestyle?, are they open to change.......are they old and buggered, and keen to retire and have their shareholdings pushed up in time for retirement...........are they stuck in the chair, sipping coffee and dutifully accepting their fees? Its not always the case of having a deal maker on the board, but its a plus...........remember, a lot of shells are sought out by outsiders, who are especially interested in "sleepy" management

Next, hit the T20............
who is there? any well known dealmakers, shell hunters, brokers or corporate heavies etc..........is the register open/widely held? circumstances are different to each of them............one heavy with board members may be too tough to crack, maybe they want out........i tend to avoid too much Asian presence as this usually means its a closed shop. The lack of big holders may mean its easier for a corporate group like say CPS, to move in, and accumulate either on market, or via underwriting a CR.

HC threads...........
you get a feel for the company.............no posts.......noice !!! its under the radar. 2 or 3 regulars, be careful as you may not get a true feel for sentiment...........3 hearts or more posting........forget it !!! its too late!! and that makes it riskier as there is not much cream left.

Gather your info, including sub notices, see if someone is moving in, is an advisor being appointed, then, you put it all on the table and try and assemble the jigsaw............
with shells, there are no hard and fast rules..........
.much of it is by intuition and gut feel, shells dont follow the rules !

Poster: john435



Date:4/03/16
Time:22:29:38
Post #:17359485

Freehold said: ↑
OK Sector Lets have you discussion topic... 1. an indepth look at finding stocks through FA - What to look for - What to Avoid - Where to get info - How to store that infor / keeping you own records data - Common Triggers - ETC 2. stock scanning/screening process, parameters, programs used
Click to expand...

Freehold a few thoughts for resource companies :

Read every announcement by every resource company - screenshot all maps, all drill results and all core photos .File by region or country/ mineral type/deposit type and other files for assays and another for core photo library

Keep track of tenement positions -who is where ,who the neighbours are,which companies are applying for ground in specific areas - a good example is KSN recently I spotted they had applied for ground prospective for lithium and bought them at .008 and 1c .Later that day the volume and price increase was spotted by those who monitor for that and went up 280% until management called a TH ....I think they were confused what to say . The next morning as they continued higher I set tight stops and subsequently exited for better then 100% gain in 48 hours .

Look for unusual volume movements in a stock price that hasn't had recent news also .

There are leaky boats out there. Information is hard to control with mobile phones these days