Today’s market is in
the wake of no QE-3 promise from the Fed’s, no sign from the Central Banks that
there will be mass injections, so oil continues to deflate. With that, Energy
leads us lower. Crude oil now is down more than a dollar to $78.79, Brent Crude
$90.58.
Should you be
investing in today’s market, the answer is YES. You need to be invested because
of the lower prices for quality stocks and the stock market is the best way to
create wealth for the individual investor.
If you buy stocks paying dividends, that’s like being paid an interest
for your investment. Another way to look at dividends, the company is paying
you to wait for the price of the stock to rise. Either way, you’re making money
with your investment.
When investing in
today’s market, stay focused on company fundamentals, which means take a look
at the numbers. Start with Return of Invested Capital (ROIC). With this number
you’re looking for a consistent growth rate of ten percent or greater for the
most recent year and at least the previous five years. Remember your looking
for a consistent growth rate of ten
percent or greater.
I’ll walk you through finding this information.
Lets go to www.MSN.COM
because its information is free and we all have access to it, even with a
smartphone.
When the page comes
up, move your curser over money, then down one row and move left to investing
and click.
In the box that says
“GET QUOTE” type in your stock ticker symbol (WAG) in this example, or just spell it out (Walgreens) and suggestions will appear, click on Walgreens. Note: On my computer I need to keep the curser in the "GET QUOTE" box for this to work.
Now go down to FUNDAMENTALS
and click on ‘Key Ratios’.
Under the price
$29.20, see Growth, and to the right find ‘Inv
Returns’ and click on that.
Now you’ve arrived.
Look for ‘Return on Capital’ and the number is
13.1. That is the growth rate for the most recent year, which is 13.1 percent….Ten
percent is our minimum.
Now below that is
Return on Capital (5-years Avg) of 13.6. This tells us that the average ROIC
growth rate for the last five years has been growing at a 13.6 percent rate.
If you know nothing
else about the company, you know that the company is being run and managed very
well. We also see consistency in how the company (CEO) manages everything about
the company to allow the company to grow and survive.
This is only the starting point for finding quality stocks. There
is still more homework to do in determining the quality of the company, and
then to arrive at a price to pay for the stock that will allow us to make a
profit.
An example of paying
too much for a company’s stock was Facebook (FB 31.67). The stock was very
overpriced when the company came out as a new IPO. No one cared about the price
because it was ‘Facebook’, and many people got hurt, so take the time to buy
stocks properly (looking at fundamentals and doing homework), and don’t get
burned.
Learn how to invest
in stocks and ignore the ‘professionals’ telling us that they have the
advantage and you and I have no chance in today’s market. ‘Bull!’
Professionals, not
all, are saying this because giving them our money to invest with makes them
money (fees) whether or not they make a profit for us.
The recent sell-offs
provide us with quality companies at discounted prices allowing us to profit.
You can invest with a better outcome than your current professional. Just look
at your 401K or similar retirement account. You can do better.
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