A Couple of Stock Ideas

 A Couple of Stock Ideas

I said I'd cover all sorts of topics of interest to me and the stock market is something I've been interested in since I was a small boy. I used to look at the yearly high and low prices in the Torygraph and work out how much money I could make if I'd bought and sold at the right time.

I really started investing seriously when I first started work in the City soon after University and it was easy to find a cheap execution only broker and research companies on the internet.

With a bit of reading and thought and trial and error I've finally arrived at a sort of deep value stock selection without over strict criteria. I guess it combines contrarianism and a discount to quality tangible assets, the most belt and braces approach I can think of. A dividend as well is the icing on the cake.

Occasionally I take a blue sky punt, but you very much have to try to pick the wheat from the chaff, if you fancy trying some at least look for some independent validation of the technology from trustworthy sources and don't trust the company's announcements solely, a lot of Chief Execs, particularly in the blue sky sphere will happily tell you the moon is made of cream cheese if it keeps the gravy train rolling.

Before starting it's worth learning how to read accounts to a reasonable standard and I only really worry about a few of the most common ratios, some of the more popular and impressive sounding ones seem the worst possible idea to me in most circumstances. I particularly hate return on capital employed or ROCE for short. You can find the annual results easily on the London Stock Exchange website any time.

As far as the accounts go, don't just stop at the profit and loss and balance sheet, it's essential to study the cash flow statement too. My theory is that if the profit or loss is roughly equal to the change in cash, the company probably isn't lying to you about the real state of their finances and there are so many clever ways to invent profit in the profit and loss alone. Remember the old saying 'cash is king'.

Also as hard as you try to reduce the risk, you can still fall prey to fraud no matter what you do.

That's about enough for now on my methodology, in the next few posts I'll give a few examples of stocks I like and how and why I picked them using these methodologies.

Copyright ©️ Romford Rob Jackson