Hey friends. My book, Choose Stocks Wisely, reflects my attempt to define a low stock price using the balance sheet as the primary tool. The book does not discuss “selling high.” When to sell is the more difficult judgment call to make as it rests more on future prospects than it does on the present substance of equity as defined by the balance sheet. […]
Greetings friends. Remember tonight as your heading for bed to set your clocks forward as Daylight Savings time for 2019 has arrived. I don’t know about you but I love having that extra hour of light before darkness sets in to close out the day.
Mississippi State University, Meridian Campus will host two “Choose Stocks Wisely” seminars, the first later this month and the second will be in April. The first seminar will introduce the balance sheet approach to valuation of an equity security while the second will focus on how to conduct research on specific companies. Go here to read about the upcoming events. […]
Hi friends. I hope you enjoyed a wonderful Thanksgiving season. Christmas is just around the corner. The weather has been warm and very dry in the deep south until just this past week but today is cool and very rainy, feeling more like winter and Christmas time.
Today, I’ll share a portion of a question and answer conversation I recently had with a reader of my book, “Choose Stocks Wisely.” Thor asked me: […]
Accrual accounting is an important concept to investors’ understanding of earnings. Since earnings drive stock prices, understanding something about how earnings are measured is surely relevant to investing in common stocks. Accrual accounting is the basis by which earnings are measured under generally accepted accounting principles (GAAP). […]
Recently, I’ve been writing about collapsing commodity prices relative to the potentially devastating negative impact on the “Investment” component of national and global economic measures of economic health. I’m certainly not enough of an expert to even start to try to assemble all the moving parts in terms of economic impact and, in turn the stock market. However, it’s got me confused enough to personally think about being far more conservative about my stock investments. […]
While I still have plans to post some about themes from a couple of other books in the not-too-distant future, I decided today to address a question I received yesterday. A good friend, Steve, shared an older article with me, yet an article that is no less relevant today than when written. Go here to read that article. […]
I hope you’ve had a good past week! I’ve learned from many books in my life, but never have I learned what I’ve gained from the Bible. […]
Al, a friend and reader of my book, “Choose Stocks Wisely,” graciously contacted Jacob (Jake) Taylor a short while back with regard to interviewing me about my book. Jake then reached out to me and his skype interview with me took place this past week. A link to the interview video is at the end of this post. […]
The stock market is flying ever upward this week. On Tuesday, I did my third CSW seminar at Mississippi State’s Meridian Campus. That day, the Dow Jones Index was up well over 200 points early in the day, only to close down by over 100 points. Then the Fed spoke and all was well again. (hint of satire)
As you know well by now, I favor value stocks since I want to pay for value that already exists over paying for value that “might” be in the future. Default risk is the risk that matters most because if the company I’ve invested in goes under, my investment in that company will never recover. Value to me is defined by the balance sheet and represents a financially solid company that stands a great chance of weathering a financial storm or setback if that comes to pass, and live to see a better day. As described in my book, “Choose Stocks Wisely,” before focusing on the balance sheet health, I experienced some bad investments that failed to weather financial storms.
Value stocks have been out of favor for a spell now while companies with weaker balance sheets (building up debt to lever higher earnings per share) have driven the stock market. See my post from late spring which cited articles on the matter here. Yet, the balance sheet always matters and when excessively leveraged companies face an adverse change in the demand climate, watch out because leverage compounds the downside just as it does the upside.
Taking on excessive leverage greatly increases the risk of default if the industry/sector weather turns inclement. Just consider that amidst the current elevated market indices that energy stocks are not participating to say the […]
When it comes to assessing the value of a company today, the financial statements clearly play an essential role. Without the financials, we simply would not even have a place to start.
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