Wednesday, 17 September 2014

Why must I buy the stock of a company?

I must buy a stock for the mere reason that somebody else will help with my future income, by doing the heavy lifting and making sure the company remains an economically viable company into the future. But before I do that i must make sure of these things;

For a first, the company:

  1. must be profitable 
  2. must pay a dividend or at least buying back share to create value for me as I continue hold  shares while at the same time increasing my share ownership
  3. must have a defensible competitive business advantage in its field of business
  4. must have honest management in place with skin in the game to run the company for the collective interest of all shareholders
  5. must be on the look out for a "tuck in" business or "bolt on" business enterprise to increase cash flow and Buffett-like float to allocate. (and by float I mean capital that is not yours, but come with zero interest charges that you can use until a claim is made against it, eg. insurance premium)
  6. must be growing its asset faster than it can deploy its capital on its own steam without borrowed money
  7. must be priced at below its asset value whether listed or not
  8. must be targeting "share of mind" (Disney) rather than "share of market" (Coca Cola) business
  9. must be clear from government regulatory legal squabble
YOU MUST BE PATIENT WHEN BUYING STOCK, IT IS NOT A RUSH IN AND RUSH OUT GAME. YOU MUST LEARN TO SIT AND WAIT FOR A FAT ELEPHANT PASSING BY TO SHOOT AT IT WITH A LOADED RIFLE OF CASH...


See Peter Lynch video https://www.youtube.com/watch?v=P5RroqvVCPc

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