Rule #1 Finance Blog
how to invest
ACCOUNTING IRREGULARITIES & THE 10-K
Here’s an email submitted recently by someone who’s really digging in on his research. A good refresher on reading a 10-K. My comments are at the bottom.
Phil,
I have recently began searching for the stocks that I believe are true Rule #1 investments. I have about 15 at this point, 4 of which are at the MOS price in which I am waiting for the three green arrows to buy. I am still in the paper trading part to learn the market and understand the fluctuations. One of the companies I have researched and believe is a good Rule #1 investment. That company is Netflix. To continue my research of Netflix I pulled the 10K and read through the auditor’s piece at the end. Here is that part of the 10K:
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
RULE #1 QUESTION OF THE WEEK: THE NEW RULE #1 SEARCH
Q: Will the new Investools Rule #1 Search turn up companies that have solid moats? I thought I saw some commodities in there. A: Moat, Meaning, Management and…
MSNBC called Your Business. It airs at 7:30 EST Sunday mornings, so
TiVo is a nice thing if you party like a rock star.
This kind of thing
is definitely a perk of having a New York Times best selling book.
Doing TV interviews is fun, but they tend to be 4 or 5 minutes, in and
out. This show is a blast because we can actually discuss some
things.
The idea of the show is to give small business owners a lot of
information in an entertaining way. The key to that is the host, JJ
Ramberg .
She is just a cool woman and really easy to work with. JJ goes on
location at interesting small businesses, interviews the founders,
and finds issues that are of concern to the owners for us to discuss.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
RULE #1 QUESTION OF THE WEEK: INSTITUTIONAL OWNERSHIP
This week's question is from Ron in Minnesota: Q: Here is a question for you. Can a company have too much institutional ownership? If institutional ownership is already…
HANDLING LARGE INVESTMENTS WITH RULE #1
Variations on this question get asked every so often.
Phil,
I have a friend who will be getting a $2,000,000 + settlement after taxes. Should he put this all into one investment account with one custodian, or should it be split up? I'll be encouraging him to max out his Roth/IRA/SEP opportunities, but with that much money, it won't make a dent for years, especially if we get him on the Rule #1 track.
Thanks,
Ladd
My response:
Hi Ladd,
If your friend puts $2 million with a custodian who determines what it gets invested in, he will have occasion soon enough to become a true believer in Rule #1. In this market, the mediocre help he will get for his $2 mil is going to get him in trouble.
Here's what I'd advise him if he intends to remain ignorant about investing. He gets two choices:
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
MISSING THE TRIGGER: OR, HOW LONG DOES A BUY SIGNAL LAST?
This question is a good one that follows on the heels of yesterday's post, Never Chase the Signals.
As a reminder to anyone new here on the Rule #1 blog — the Archives (you can get to them via the side bar) are a wealth of info. If you're looking to learn more about how to use the MACD, MA and Stochastic, be sure to read through every post in the index called The Three Tools.
Now, onto the question:
Phil, if one misses the trigger point, but the 3 tools still say buy and the price is still below MOS (and you've done all the other homework, of course), do you buy?
An example here is Lowe's. I missed the price crossing the
30 day MA about 3-4 days ago, which was the last of the tools to signal
'buy'. The price has gone up $1/share in that time. That would make
me emotionally think this is not the time to buy it.What do you do?
How long does a "buy" signal last after the triggers have been crossed
(days, % of price, not at all)?
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
RULE #1 QUESTION OF THE WEEK: DOES BUYING BACK CO. STOCK LOWER THE FREE CASH GROWTH RATE?
This question comes from Gar in Portland, OR: Q: When looking at a company's free cash, the rate of growth up to the current year calculates to 24%.…
Somehow Monday came and went and I forgot the 9 a.m. post. Here it is, with my apologies. David had a question about how to identify a commodity stock. Read on:
Hi Phil,
Here’s a question that you may want to touch on in a blog entry. I know
Rule #1 investors do not trade in commodities so I recently dropped UNT
because it is resource based (thankfully at a small profit). I am
wondering what constitutes a commodity in your eyes. I’ve been reading
Robert G. Halstrom’s “The Warren Buffet Way.” He includes (p.71 )
automobiles, computers, airline service, banking and insurance as
commodity-type stock. Based on Halstrom’s assertion, I imagine we
should stay away from Honda (HMO) or IBM even if they had excellent
numbers and their share prices fell to an acceptable MOS. Would you
agree?David Brien
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
RULE #1 QUESTION OF THE WEEK: LEVERED FREE CASH FLOW
This week’s Question is from Greg in Lancaster, PA: Q: Yahoo reports "levered free cash flow". What exactly does this mean? Thanks. A: It’s what’s left of free…
A QUICK LOOK AT SATYAM COMPUTER SERVICES (SAY)
For those of you interested in learning more about volume spikes and institutional money flow, read on:
Phil,
When should I get out when I make a mistake? I'm learning that green arrows can vanish quickly.
I've done my homework. I believe I understand the business, it has a moat, management is trustworthy and an MOS price has been realistically decided.
As soon as three green arrows appeared I purchased but may have pulled the trigger too soon. Within hours the price dipped back below the moving average and the green arrow vanished. MACD and Stochastic still are green.
Do I simply wait until all three are red to get out?
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.