You Can Be A Stock Market Genius
Owning just two stocks eliminates 46% of the non-market risk of holding just one stock.
After purchasing 6 to 8 stocks in different industries, the reduction of risk in your portfolio by adding additional stocks is small.
It’s much safer to be wrong in a crowd than to be the only one getting something wrong. As a result, getting fresh, independent thinking from analysts is the exception, not the norm.
Only swing at the trades you think you can slam out of the park. There are no strikes in the stock market. Wait for your pitch.
The Benjamin Graham approach to investing with a well-diversified portfolio full of low P/E and low price-to-book ratios remains a relatively simple and effective investment strategy.
The purpose of company spin-offs is usually so the subsidiary being spun off will be better appreciated by the market (valued higher than when it was under the umbrella of the conglomerate).
Great spin-off buying opportunities can stem from institutions not buying for reasons other than fundamental value, such as liquidity, compliance, or market capitalization.
One of the most important considerations when analyzing a spin-off’s potential future value is how many shares of that spin-off insiders/business leaders hold or are compensated with.
Don’t expect bullish announcements or statements for a spin-off until a price has been established for its management’s incentive stock options.
The vast majority of pension and mutual fund managers specialize in either bond investments or stock investments, not both. This means they’ll generally want out of merger securities.
Follow the stocks that Wall Street isn’t following.
In many cases, the sale or liquidation of an unprofitable subsidiary can result in positive net proceeds or higher per share earnings.
To find information about a company’s business, operating results, balance sheets, income statement, and cash flow statements, look to their 10K and 10Q reports.
Almost anything you would want to know about executives stock ownership, stock options, and overall compensation can be found in a company’s annual proxy statements, schedule 14A.
For all the information you could ever want to know about a spin-off, look to a company’s form 10.
In cases where annual amortization charges are large, free cash flow is usually a far superior measure of a company’s earning power.
Book value represents the historical value of a company’s assets less all of its liabilities.
Margin of safety is the cushion between the price of an asset and its estimated value.
The earnings yield is just the reverse of the P/E ratio and can be a good reference when comparing the value of stocks to bonds or other yielding assets.