Rule #1 Finance Blog
how to invest
HOMEWORK: OIL STATES INTERNATIONAL, INC. (OIS)
Hi Phil,
I really enjoyed your recent presentation in Cincinnati. I am also really looking forward to your book coming out in March.
I took your advice and purchased the professional investing tools from
success magazine and have started to put the information into practice. I only purchased the 1k program so I will stick to buying stocks for now (the other programs offer the options course for big $$).I recently purchased OIS for my first stock. 100 shares at $34.90. Has appreciated a little so I will continue to sit tight and let the arrows be my guide.
I have just a couple of questions for you if I may. When you go to
the "valuation analysis" on the website to find the target price so you can look for stocks at least 50% of that number.. the site has a built in "discount rate of 15%" on the far left. Is that number
supposed to be 15% becasue I know you can change that field? If not 15%, what number should be used? Also, can you buy small cap nasdaq with the same rules and still be a prudent investor or is it best to stay with the NYSE?I really appreciate any insight you can provide. Thanks so much!
Greg
Dayton, OHPS Can you recommend other good reading material until your book come out in March?
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.
I’ve been digging a little deeper into some reports, and I have to admit, most of the numbers are still meaningless to me, so bear with me here. I looked up the quarterly reports for both Netflix and Blockbuster and found some interesting differences…
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.
ON BUD AND THE IMPORTANCE OF EQUITY GROWTH RATE
Here’s a followup letter from Dinesh, who pointed out my Bud oversight the other day. Keep reading this post to the end, because I go on to explain why Equity Growth Rate is so important to Rule #1 investors.
Hello Phil,
one more thing…
Buffet bought BUD news came out from company (not from BRK) in April maybe on 21st. But since then BRK has not make any comments (They make no comments in either case if they are buying or not. that is their policy.). However they need to disclose their holding to SEC every quarter. and they did not disclose BUD in their last report in August. (in which they listed Lexmark, Home depot, Lows and Comcast etc.)
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.
HOMEWORK: CENTRAL EUROPEAN DISTRIBUTION CO. (CEDC)
Plenty of good homework to share with readers this week. This one comes from Marvin in Ohio.
Phil,
I have taken the stock class when it was recently
offered in Cincinnati. I have been using your blog and the investools website. I have learned so much.I wanted to email you to make sure that I am understanding all of this new found knowledge. So here is my case study:
Company: Central European Distr Co
Symbol: CEDC
Current Price: 42.12 (9/26)
Phase I: 7/3
MG-Zacks: 4.00
Price Pattern: 4.00
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.
Here’s a great first homework assignment from Rachael, who chose Netflix (NFLX) after doing her 3 circles assignment (Passion, Talent, Money) to locate an Industry Sector. I think she did a terrific job. Keep reading.
Hi Phil!
I was reading your blog this morning about the Alex and 4Ms, so I did some research on one of the companies I have my eye on…Netflix (NFLX). Would you mind giving me a critique of my thinking?
Netflix is something that fits into my 3 columns so to speak, movies are a passion of mine, I spend a lot of time watching them (very good at this), and definitely a lot of money too, so this seemed like a good match for me in the "meaning" department. In addition, I admire the company’s revolutionary idea that has truly changed the way America watches movies.
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.
WHERE TO FIND MISSION STATEMENTS
Quick note: I just discovered Man on a Mission, a blog that compiles company Mission Statements. This is a great way to begin researching management for potential 4M/Rule…
REFRESHER COURSE: HOW TO BEGIN IDENTIFYING 4M BUSINESSES
The following question came to me from Alex, age 16, who may be the youngest Rule #1 investor to write to me so far. He saw me speak in Boston a few months back and has been emailing me since, practicing by doing a 4M analysis on Delta. For those who, like Alex, don’t know where to start when picking a company to research, read on. This is a good refresher for regular readers and a good intro for new ones.
I also suggest everyone reads my recent blog post about how to invest money wisely.
Mr. Town,
I listened with rapt attention to your speech at the Boston seminar, but I must admit that I can’t afford success magazine.com and have to use something called smart money instead (same basic idea… imaginary money, buy imaginary stock), and I have very little idea of what I am doing. And I am ashamed to concede this (I hope this doesn’t reveal me as ignorant) despite your useful tips and everything, I still have no idea what companies I should be picking…
Alex
My response:
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.
YOUR HOMEWORK: SMITHFIELD FOOD CO. (SFD)
Here’s a homework assignment submitted by Rick S. on September 18.
For new visitors to the blog: homework assignments are single-company analyses submitted by readers. (For rules on how to submit a homework, go here… then email me.)
Each homework attempts to show whether a company is a good buy for a Rule #1 investor — in other words, is it a 4M company? Is it a wonderful company we understand, and can we get it at an attractive price? (A discount to value?)
I critique students’ results here on the blog to see if they’re on the right track.
The case study below is a good example of a Homework. Here’s Rick’s letter:
Phil,
I’ve been working on your formula and would like you to critique my work.
The company is Smithfield Foods (SFD). Current EPS is 2.59, Current P/E is 10.6, Growth rate – Historical = 24%, Analyst = 10%. Future EPS (10 Yr) = 6.27, Future Stock price = 125 MOS = 15.68 Currently selling for 27.39. The only variable I wasn’t sure where you found it was the analyst projections. (I used the est. earnings for 5 yrs under MSN, research, earnings)
Looking forward to your response.
Rick
And here’s what I told him:
Hi Richard:
Smithfield makes pork stuff and ships it all over. People have been eating pork for about 10,000 years, so it’s likely we’ll continue. Gotta like that. I like the work you did on the numbers to verify that these guys have a Brand Moat and have a predictable future, but let me take you through it again my way:
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.
DON’T FORGET THE “MEANING” PART OF 4M
A nice guy named Tim is taking the Success investor education class. He emailed me to ask me about the following. Some of the info I’m using for the analysis is time sensitive, so I’m going to post this as/is and not worry about linking to the numbers online. Everyone should know where to find them on MSN Money and Yahoo Finance by now.
The important thing to look out for here is Meaning. Make sure you understand the business: what it does and what its moat is. Good numbers at a glance aren’t enough.
Hi Phil,
I’ve found a couple of stocks that pass both Phrase 1 and 2 and whose current price is about half of the Target price – OIS and XXIA. Plus both of these stocks had 3 greens as Friday. So, I’m planning to buy both.
My response:
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.
Here’s another exchange I had with someone about Growth Rate & The Rule of 72. I’m also playing around with a new post format for letters. Let me know if you like it.
On 8/29/05, Bret wrote:
Phil,
I’ve been addicted to your blog site. My wife is starting to call me a "stock geek." You see once I get interested in something, it becomes somewhat of an obsession. At least early on.
Anyway, I’ve been trying to use the formulas from your site in an excel spread sheet. The one piece of information I’m have the most trouble locating on MSN Money is the Growth Rate for a stock. Could you please tell me where that percentage is located and is it called anything else?
I worked out the spreadsheet for the Eli Lilley drug stock from the blog entry on the 26th and it seemed to work out in my spread sheet. This stock sounds extremely bloated at this time and if I’m correct, I think the fellow should sell it at the first chance he gets. It’s like dump it and run, FAST!! before anyone realizes. Am I right?
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.