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Data:2009-12-12 2:34
As long as a little take the time and effort, investors can avoid investing "pure get lucky," the vicious circle. For ease of understanding, we have set out a list of 10 basic questions, each investor will own hard-earned money into a stock before, you should first ask these questions.
Take your own hard-earned money bet, be sure to look at the following this simple article, find out they were going to face.
In the last century the stock market frenzy during the late 90's survey showed that retail investors will use a great effort in exploring where to vacation, but they are too mean to spend time to research buy stock. Sounds really rash, is not it? But it really is that people are familiar with common practice. To tell the truth, for most people, turning over the pages of tourist guides, look for a waterfront hotel on the island of Antigua than listed companies, such as understanding of such complex things easier. We prefer to dice to decide which to buy stocks.
But it is hard to believe is this: as long as a little take the time and energy, investors can avoid investing "pure get lucky," the vicious circle. For ease of understanding, we have set out a list of 10 basic questions, each investor will own hard-earned money into a stock before, you should first ask these questions. This approach was inspired by �Ram Charan (Ram Charan) such as corporate advisory division, it does not require you to be painstakingly carried out the financial securities analysis. In fact, some issues are more obvious and basic things sound. But we can guarantee: As long as you buy a stock before actually asking these questions, you are a down-according to a company's long-term prospects for the next bet, not just luck.
This is a company how to make money?
If you do not know what you buy, you pay for it is difficult to judge how much of the. Therefore, buying stocks before, you should look at how the company is making money. This problem sounds simple, but the answer is not always so clear. For example, General Motors, which each year 10 million cars, but unfortunately the company is almost no money in it. In fact, at present almost all of GM's profits come from through the company's financial subsidiary of General Motors financial services company loans to consumers. And you may guess, the profits from car loans account for only half of the total profits, while the rest came from by ditech a subsidiary of General Motors issued this housing mortgage loans (that is, the ubiquitous television commercials that companies ). This does not necessarily explain GM's stock on the bad. But obviously, this allows you to this company's risks and potential profits have a better understanding.
A quick glance at the "Fortune" 500 company information, you can see dozens of examples of that. This is why each and every investor must look at the company's latest annual report. You can learn more about the annual report the company's business structure, and every one business, sales and earnings data details. You can also find another key questions: whether these gains may be converted into cash in the hands of investors? While the "net" and "earnings per share" these things will become a commercial media headlines, but these are only the concept of accounting. To shareholders, the most important thing is real, iron nails in cash, whether in the form of cash dividends are distributed to the shareholders, or in the form of re-investment into the company operations, thus promoting the company's share price rose. Opening the annual report of the cash flow statements, look at the company's "management to bring in cash flow" is positive or negative, as well as cash flow is increasing or decreasing. Look for to see if there is no such danger signals: (income shown in the table) net profit in the growth, while cash flow is decreasing. If so, it might be a sign that companies use a "creative" accounting techniques to book profits overstated, which is no benefit to shareholders. Enron is an example.
2 sales are real do?
Speaking of cash, we have to understand one of the points is: Under the accounting provisions in an amount of cash Daozhang indeed long before, the company can be included in sales revenue (the worst case, this amount of cash, never to not account). This may significantly affect the stock you intend to buy the current price. Then how do you know whether the company has such a thing? Can usually be submitted from the company's earnings report is very clear to see that. The technology company RSA Security as an example. In the first quarter of 2001 financial report notes, the company disclosed that it had turned to adopt a more aggressive (but also the legal) accounting methods at the same time, the software will be distributed to dealers included sales of its ─ ─ Why must wait until the end-user actually bought the product after the recording of it?
Sometimes, this has a significant warning signs of more subtle manipulation of earnings. For example, for those sales and the growth rate much higher than the competitor's company to be vigilant. Forensic accountants �Jack Ciesielski said, "If you do not see sales growth led to the specific reasons, for example, companies selling a product in particular, then you have to more than splenetic," he is the authoritative "analysis Division Accounting Observer, "the publisher. Addition, we must be careful that the only way to achieve sales growth is the annexation of other companies companies. If a company must purchase an annual average of several firms, its motivation may be the short-term management and to meet Wall Street's expectations. From a long-term point of view, a number of independent companies that together might be a mess, and pay a heavy price.
3, compared with its competitors, the company operated like?
To buy a company's stock before the buildup to understand how it competitive, it is essential. The easiest starting point is the analysis of the company's sales data. �co-fund manager Ron Muhlenkamp says, "I wanted to know whether a company is stronger than the competition, the best clue is to see the annual income of the company." Over the past 10 years, named his fund performance has been stronger than the S & P 500 Index. If the company in a high-growth industries (such as electronic games), then his sales growth compared with competitors, how? If the company in a mature industry (eg retail), over the past few years, whether flat or increase sales? Particular attention to the sales performance of new competitors, especially in those who have stopped growth. Muhlenkamp said, "Wal-Mart into the retail industry is very frustrating for all. In the past, people feel that Kroger and Safeway cheap enough now, but then there is no Wal-Mart to compete with them."
In contrast to the company and its competitors, do not forget to compare costs. The automobile manufacturers General Motors and Ford, for example, they are burdened with retiree pension and health insurance such a heavy burden, these expenses make them with the Toyota and Honda and other foreign rivals to compete in a very disadvantageous position.
4 economic environment the company have any effect?
Highly cyclical nature of some stocks ─ ─ in other words, company performance depends largely on the overall economic situation. Cyclical fluctuations in the stock and sometimes seemingly cheap, but in reality does not. For example, in times of economic downturn, paper stock prices are likely to become very cheap. But this is a great cause: the economic downturn, many companies are reducing ad spending, newspapers and magazines, fewer page, so the company's sales of paper reduction. Of course, the economic recession, things will move the other direction.
Investors should pay close attention to interest rate movements, because changes in interest rates would have a great impact on many sectors. For example, significant reduction in interest rates over the past two years, resulting in re-housing loans and consumer spending increased dramatically. This is for residential builders, electronics manufacturers and retailers and other industries is a great good. However, interest rates are unlikely to continue to reduce, and most economists expect interest rate may be transferred to 2004. Therefore, those who benefit from lower interest rates the company's growth may slow down dramatically.
The need to consider before buying stocks one of the most important factors that may cause the price of the company's industry, in which the degree of competition. Price war may be of great benefit to consumers, but will quickly reduce the company's profits. Consulting firm McKinsey on the "Fortune" 1,000 largest companies in the analysis shows that, for a company, the price of every product sales fell 5%, sales have increased by 18%, the company in order to maintain the original profits. McKinsey & Company partner, pricing expert Craig �Zawada, warned that "the majority of the industry is unable to increase sales so much." In most cases, the companies want to launch a price war to ensure a profit, there must be a lot stronger than the competition a cost advantage. Take a look at the so-called "Hamburg war" to McDonald's and Burger King continue to profits resulting from a disaster, we understand these points.
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5 What factors are likely to damage or even destruction in the next few years, the company?
Invest in a company, you must consider the company may encounter in the future, the worst case. For example, if a large part of the company's sales are from a particular customer, then if the company loses the customer, sales may be substantially reduced. Take a look at the company's initial prospectus (if the company had just listed) or the Company's Securities and Futures Commission (SEC) to submit the latest 10-K annual report, you will be able to understand these risks (you can in the United States Securities and Futures Commission site freeedgar download these files). Take a look at the end of 1999 listing of manufacturers of optical fiber Sycamore Networks, read the company's prospectus can be found in the company who is only one client ─ ─ Williams Communications. Two and a half later, Williams Communications bankruptcy, and now Sycamore (the company later found a number of other customers) than their 2000 high point stock has fallen 97%.
Some company's risk than other companies are inherently large. Look at no profit biotechnology company bar, these drugs are not in its magic by the U.S. Food and Drug Administration (FDA) for approval, the company's share price fell from the sky suddenly went underground. It also made us realize that a very important additional point: If a company's performance was so heavily dependent on a particular individual's behavior and reputation, then when you have to guard against: the risk of the stock is naturally higher than the average stock out a few grades. Indeed, in June 2002 �Martha Stewart into a lawsuit, based on the "Martha Stewart" named after the company Martha Stewart Living Omnimedia's stock dropped as much as half.
6 management is hiding expenses?
Looking at a company's history, write-offs and restructuring charges are often difficult to avoid. However, if a company year after year, have included "one-off" spending habits, we must be vigilant in: This is actually caused some investors to be able to understand how the company's profits in the end. For example, retailers Kmart just before going bankrupt in 2002, continued as to what expenditures are included in a one-time expenditures, poor management from the closure of shops, write-off of obsolete inventory to "reposition" the Internet business expenses are covered. New York Investment Management chief investment officer Michelle �Kleiman has been the phenomenon of family expenditure on research, she said, "This is too typical of the. They have been included in all of these expenses, there will be no competitors."
Kleiman suggested that if you find a company earnings reports over the past five years, at least three years of a one-time expenses, it would like to stock alert. In fact, her research found that 70% of the cases, the performance of the stock of such companies has always been weaker than the S & P 500 Index. To view the financial statements, notes on the back of a one-time expenditure of interpretation; sometimes this type of expenditure comes from those who actually benefit the company's initiatives, for example through lower interest rates to refinance debt ahead of schedule. But usually, this spending is for people interested in investing in bad news.
7 whether the company within its means for?
Even today, the company's profit looks good, but if the company has accumulated a lot of long-term debt, such a good time it will be difficult long-term. A stock before buying anything, you have to first take a look at the company's balance sheet and a lot of debt ─ ─ debt overhang is very risky, because the sales to reduce or interest rates could jeopardize the company's ability to repay interest on debt. And high debt ratio also significantly reduced the profit margin. Financial Alert Fund, founder of Bob �Olstein (Bob Olstein) said, "If you owe a debt of ass, you must not only take the right path, but also have to know when to take the right path, otherwise you're dead wrong . " In addition, creditors have a priority right to compensation: The company must first pay the interest on the debt, but no obligation to distribute dividends to its shareholders. To determine whether a company is too much debt, you can use long-term debt divided by total capital (debt plus equity ─ ─ these two figures can be found on the balance sheet). If the result is greater than 50%, most likely the company's liabilities exceeded its ability to repay.
But let the company suffer a setback not just debt. Option ─ ─ usual sense of executive pay an additional sum of money is beyond ─ ─ For the shareholders are paying a high price. Annual Report of the notes in the company, must disclose the following options, the company counted revenue. Have to look at this part of the Note: Options can make an instant profits have been announced into a loss, just like in 2002, if the Apple Computer, Applied Materials, and Charles Schwab included in the cost of options, the results of its revenue is entirely different.
8 Who is in charge of the overall situation?
For the average outsider, the assessment is the quality of a company's management team is often not an easy task. However, experts say, investors should still consider before buying shares some of the traditional indicators. Mince words of the Prudential Financial Group �Bank analyst Mike Mayo (Mike Mayo) suggested that investors can read over the years in the annual report to shareholders, CEO's letter. Take a look at the company's management to convey information is consistent, or constantly changing strategies, poor management or the company blamed external factors. If the latter, it is necessary to avoid the stock.
Harvard Business School study of chief executive officer and assistant professor of organizational behavior Donald �Saar believes that even if the corporate headquarters of the management team can focus on his right, but "if I see this company headquarters is a large, brand new building, I will sell the stock. shareholders have been squandering the money of so many. "Saar warned that investors should avoid in the new headquarters building the company arranged the following things: Architectural Design hanging Award, the lobby, there are waterfalls, or the roof a helicopter parking apron. While this warning may sound a bit funny, but Sal insisted that he is very serious: "The management said,` we won, and now a monument to be erected to mark the celebration '. But they did not think, `We won, But wait: this may not guarantee the future, we must also win '. "
9 What is the company's real value?
If you are buying when the price is too high, then even the world's best companies to buy stocks, will become the worst investment. Similarly, if you buy a low-priced stock, even if the company fundamentals are flat, it may become a star in your portfolio. But, as Warren Buffett in "Fortune", "2001 Investment Guide" and pointed out what investors are often cheaper to buy something, but just do not like buying stocks. In fact, investors are always more willing to wait until then to buy the stock price.
Do not fall into this trap. If you want to buy a huge volume of the stock recently, but also create a new high over the past year, we should find out the reasons behind: The stock is a crowd sought after and can not be your excuse to buy. Washington State University finance professor John �Noffsinger, "said retail investors are always willing to go with the flow." He is the author of "Investment Madness: Psychological factors can affect investment," a book. He writes: "However, if because other people are buying a stock, you want to buy, then you are not to be the last one to buy it? Do you do not want everyone to buy ahead of it?"
Therefore, the stock price-earnings ratio (stock price divided by the earnings per share) is a measure of corporate value is still the best, most efficient way. The usual rule is that the majority of the pursuit of value-added portfolio managers do not touch that city, more than 30 times earnings of companies, even if the company in a growth-oriented industry (why not? If investors want to invest in this company were from the Lee, the company's returns to be higher than the overall market value of more than 50%). Remember, if you are used to year or the year after the expected earnings to calculate the price-earnings ratio, then you are speculating, rather than calculated. The next key step is to review the cash flow table to see whether it has brought positive operating cash flow (preferably growing cash flow). If a company's cash flow has been negative, then its share price rise in most is everyone's wishful thinking, rather than economic truth.
10 I really need to have the stock do?
In the United States publicly traded shares of various exchanges around 15,000 branches, so there is no stock that you have to invest. But usually we are wishful to think that if WorldCom did not buy or eToys stock, we will miss a good opportunity to make a fortune. Noffsinger said, "In most cases, we invest in, based on hearsay, which is usually no good result." So here you have to right themselves, guarantee, at least you answer the questions first to the ninth only after buying the stock. If you invest on this basis, then no matter the market, Shen is floating, you will simply hold their own shares. You will also know they are investing for the long-term economic interests, rather than gambling, it makes you feel happy.
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