Why don't the most successful investors live near Wall Street?
This week on InvestED Podcast we'll explore the concept of groupthink and show how the gurus are able to avoid it. We will also revisit the business valuation checklist we established last week and dive into the remaining eight items on the list.
In Episode 71 You’ll Learn:
What is Groupthink and how to avoid it.
Understanding a company’s Trailing Twelve Months Earnings Per Share.
Finding the Free Cash Flow (FCF) and Owner’s Cash for the Trailing Twelve Months.
Why we calculate the Margin Of Safety, Payback Time and Cap Rate.
Why it’s important to make sure 2 out of 3 valuation methods above show that the company is on sale.
Where to find out which company stocks the trusted gurus are buying.
What kind of events we are looking for in checklist item 11.
Phil’s Value Investing Checklist:
The Historical Growth Rate is reasonably consistent.
The Growth Rate you are projecting for the next 7-10 years is reasonably predictable.
The Price-Earnings Ratio (P/E) for a bull market sale in 10 years is reasonable and historical.
The Minimum Acceptable Rate of Return (MARR) is 15%.
Find the Trailing Twelve Months Earnings Per Share.
Find the Free Cash Flow (FCF) for the Trailing Twelve Months.
Find the Owner’s Cash for the Trailing Twelve Months.
Calculate the Margin Of Safety, Payback Time and Cap Rate.
Make sure 2 out of the 3 valuation methods from #8 show that the company stock is on sale.
A trusted guru is buying the business.
There is an obvious event with a 1-3 year future duration that has created fear.
Show Notes:
Thank you for listening. Please subscribe on iTunes and leave a review. Learn more about Rule #1 Investing by clicking the link below to get my Checklist for Successful Investing.
