Money and Finance
Step one in the investment decision process lies in identifying companies that are high quality. Whether that's through their moats, their operational excellence, their cash generation, their growth prospects, their credit ratings, their dividend or any other factors the high quality companies are the source of long term investment gains.
Step two in the investment decision process is where you determine what price you are willing to pay for shares. This is a trickier step because it generally entails making assumptions about future growth and is likely the step that has the most variance among investors.
Some use a ratio of the current price to the 52 low and 52 week high. Others use comparisons to traditional valuation multiples such as price to earnings, price to cash flow, price to book value, dividend yield or just about any other per share financial metric. Still others will use some kind I estimation of future dividends or cash flows of the company and discount them back to the present. Personally, I use a combination of many of these but whatever valuation method you use the end goal is a price target.
Once you've identified a price target you can now move on to the actual purchase of shares, of course there's still plenty of choices for that as well. You can set up a limit order to purchase the amount of shares of the company at a specific price and wait for the price to reach your price target. There's also the options market which is a valuable and often overlooked opportunity to generate extra income.
Continue reading the article on Seeking Alpha.
Also make sure to read my recent analysis of Visa on Seeking Alpha.
Image source
- 3m Is A Wonderful Company But Not A Buy Here
The economy is on stable ground but is far from growing by leaps and bounds. Even worse the volatility in the stock markets are playing with investors minds. Back in August and September the stock markets declined significantly, but shot up 10% in October...
- 6 Months Later, Still Not The Time For Mccormick
Consumer staples companies typically make for excellent dividend growth candidates. In general, they have rather inelastic demand that doesn't see operations fluctuate with the health of the economy, at least not to the degree that other sectors...
- The Best Of Both Worlds: Put Options
Obviously the most important part about investing is finding the truly great companies that have the ability to grow profits and dividends for decades on end. Once you identify those companies through a qualitative analysis the next step I like to take...
- U.s. Beverage Valuation Wrap Up
Throughout February we had fourth quarter and full year earnings releases from the three major players in the non-alcoholic beverage industry. As the new data points rolled in I figured it was time to update the valuations on the Coca-Cola Company (KO),...
- Recent Buy
This morning I purchased 40 shares of Target (TGT) for a price of $61.81 per share. With the current dividend payment of $1.44 I was able to pick up the shares for a 2.32% YOC. I've been following Target for a while and the price just never quite...
Money and Finance
Calling Up Visa For Cash
Step two in the investment decision process is where you determine what price you are willing to pay for shares. This is a trickier step because it generally entails making assumptions about future growth and is likely the step that has the most variance among investors.
Some use a ratio of the current price to the 52 low and 52 week high. Others use comparisons to traditional valuation multiples such as price to earnings, price to cash flow, price to book value, dividend yield or just about any other per share financial metric. Still others will use some kind I estimation of future dividends or cash flows of the company and discount them back to the present. Personally, I use a combination of many of these but whatever valuation method you use the end goal is a price target.
Once you've identified a price target you can now move on to the actual purchase of shares, of course there's still plenty of choices for that as well. You can set up a limit order to purchase the amount of shares of the company at a specific price and wait for the price to reach your price target. There's also the options market which is a valuable and often overlooked opportunity to generate extra income.
Continue reading the article on Seeking Alpha.
Also make sure to read my recent analysis of Visa on Seeking Alpha.
You can check out more of my stock and valuation analyses on my Stock Analysis page.
Image source
- 3m Is A Wonderful Company But Not A Buy Here
The economy is on stable ground but is far from growing by leaps and bounds. Even worse the volatility in the stock markets are playing with investors minds. Back in August and September the stock markets declined significantly, but shot up 10% in October...
- 6 Months Later, Still Not The Time For Mccormick
Consumer staples companies typically make for excellent dividend growth candidates. In general, they have rather inelastic demand that doesn't see operations fluctuate with the health of the economy, at least not to the degree that other sectors...
- The Best Of Both Worlds: Put Options
Obviously the most important part about investing is finding the truly great companies that have the ability to grow profits and dividends for decades on end. Once you identify those companies through a qualitative analysis the next step I like to take...
- U.s. Beverage Valuation Wrap Up
Throughout February we had fourth quarter and full year earnings releases from the three major players in the non-alcoholic beverage industry. As the new data points rolled in I figured it was time to update the valuations on the Coca-Cola Company (KO),...
- Recent Buy
This morning I purchased 40 shares of Target (TGT) for a price of $61.81 per share. With the current dividend payment of $1.44 I was able to pick up the shares for a 2.32% YOC. I've been following Target for a while and the price just never quite...