Risk | Choose Stocks Wisely

A High Pressure Economy

Last week I posted about a couple of recent articles that discussed both Federal Reserve Chairwoman Janet Yellen’s and former Treasury Secretary Larry Summer’s support for potential future government purchases of stocks. The very notion of the government entering the stock market as a regular participant challenges my notion of a free market. This week, I’ll write a little about a Reuter’s article from October 14 expressing Yellen’s floating of the idea of running a high pressure economy. […]

October 22nd, 2016|Balance Sheet, Federal Reserve, Risk|0 Comments

The Risk of Execution

As you know by now, my practice is to try and buy all the valuable equity I can get for the dollar when I buy stock. I’m keenly interested in what the company says about its future in terms of sales and earnings because the future operating performance is what will dictate the stock price performance after I buy. […]

December 6th, 2014|Balance Sheet, Risk|0 Comments

Netflix, Equity and Earnings

A reader named Marc who has become a friend over the past year corresponds with me from time to time. This week he wrote me about Netflix (NFLX) as an excellent very recent example of a major point of emphasis in my book, “Choose Stocks Wisely.”

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October 17th, 2014|Balance Sheet, earnings, Equity, Risk|2 Comments

I Keep Hearing that the Stock Market Needs to Correct

Whether you invest in the stock market or just read the financial news, you are probably coming across opinions expressed with regard to an anticipated stock market correction. After all, the market has been on a steep incline pretty much since it bottomed in the spring of 2009 during the hard recession days. Couple that with the fact that there are a lot of people who don’t “feel” like their financial situations have improved all so much and the result is that the sustained rise in the stock market can leave a person scratching his/her head for an answer as to how it keeps going. […]

September 12th, 2014|Balance Sheet, common stock, Risk|0 Comments

Just Why Is The Balance Sheet So Important?

If you were to look at a lot of companies and their stock prices, you could often conclude that the balance sheet does not seem important at all. I’ve mentioned before that there are numerous companies that sport a healthy stock price while also carrying a negative tangible book value per share. In such cases, future expected earnings must uphold the stock prices because no case can be made from the balance sheets that solid underlying equity support exists.
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April 30th, 2014|Balance Sheet, Equity, Risk|0 Comments

Financial Leverage and Risk

I talked this week about financial leverage during one of the college courses I’m teaching this semester. Financial leverage describes the use of debt financing as a means of levering earnings higher. Using debt financing is like using a crowbar on earnings. Indeed, when a company is experiencing profitability, it can enhance profits through the benefits of using debt to finance the assets used in operations.

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February 13th, 2014|Balance Sheet, earnings, Risk|2 Comments

More Q & A

I’ve been blessed to experience wonderful friendships across my life. What a privilege to teach accounting to people in college over the years! I feel I’ve already made new friends via the website-enabled interaction that surrounds my book, “Choose Stocks Wisely.” Tonight, I will briefly share a very recent interesting question I received.

A reader of my book wrote the following:

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January 25th, 2014|Balance Sheet, Fundamental Analysis, Risk, Scorecard, Technical Analysis|2 Comments

The Lower the Risk, the Greater the Return

Risk, relative to investing, involves the possibility of losing some or all of the money invested. You’ve probably heard a basic premise in finance that a positive relationship exists between risk and return. That is, the greater the risk, the greater the potential return.

Simply put, to entice someone to invest in stocks over bonds, there has to be a greater expected payoff for investing in stocks. Bonds pay a certain rate of interest on a certain date and have a maturity date on which principal is to be repaid to the investor. There are no contracted payment terms for stock investors. Further, bondholders get paid back before stockholders receive anything if the underlying company goes bankrupt. In most bankruptcy cases, stockholders lose everything.

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January 18th, 2014|Balance Sheet, return/reward, Risk|0 Comments

Scorecard and Screening Talk: Relaxing More Filters

Parts A and B of my Scorecard exist to determine the “quality” of the balance sheet. Parts C and D of the Scorecard use the balance sheet numbers to define a low price “if” quality has been assured in Parts A and B. Taken as a whole, the Scorecard recognizes that a low-risk situation is one where I buy into a healthy company when a share of company ownership is available at a bargain price. The absence of quality or a low price means I’m taking more risk.

As discussed in my book, I use the finviz website to screen for stocks, selecting filters in a manner that would turn up companies that could possibly meet both my quality and low-price standards. The standards are then implemented on a particular stock through the parts of my Scorecard.

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January 3rd, 2014|Balance Sheet, Risk, Scorecard, stock filters, stock screen|2 Comments

Balance Sheet Talk

My book, Choose Stocks Wisely, is simply about the balance sheet’s critical role to risk assessment as it relates to buying quality stocks at low prices. Yet, you rarely hear the balance sheet discussed when stock prices are the topic of conversation. Company earnings are always front and center and the balance sheet is not an earnings report but a statement about financial position and financial health.

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January 3rd, 2014|Balance Sheet, earnings, Risk|1 Comment