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FINANCIAL CHRONICLE™ » EXPERT CHRONICLE™ » The Bargain Hunter's Checklist

The Bargain Hunter's Checklist

Go down  Message [Page 2 of 1]

sriranga


Co-Admin

The Bargain Hunter's Checklist - Page 2 Invest11

10 things to check before you press the buy button.

Here is the 10-point checklist of things to reassure yourself about before you make that snap judgement. Think of it like the AA's used car checklist.
1. Check the P/E and share price history
It's probably a low P/E that makes it look a bargain share. But compare the latest and forecast P/Es with their historical levels. If it's always been cheap, then it's not cheap now. Have a look at the share price graph over 5 years as well as shorter periods.

2. Check dividend cover and track record
Alternatively it might be the dividend that attracts you. But don't rely on a juicy dividend yield if it is not well covered. If you are buying for the yield, then you'll want to see a decent track record too.

3. Are revenues and operating profit rising?
Check the latest financials. At minimum check if revenues and operating profit increased in the latest period. If performance is declining at this level then the company may have serious problems.

4. Does the company generate cash?
Compare cash flow from operations with the operating profit. If it's a much lower figure then the company may have difficulty generating cash. Also look if net cash increased or decreased. If there was a large decrease then it needs further investigation.

5. Check debt
Look at net gearing and also interest cover, which is harder to window-dress. In the current environment companies with high debt are vulnerable to economic downturns, credit crunches and (eventually) interest rate rises.

6. Check net asset cover
Compare the tangible net asset per share with the share price. Tangible assets may provide a bit of a safety net.

7. Do you know how the company makes money?
This is a two part question: a) What does the company do? And b) How does it make money from that? Ideally it includes looking at the geographic and segmental analysis of revenues and profit, which you need to get from the company's latest report.

8. Look at the latest news
Check recent regulatory news and press articles for any important items.

9. Check directors' dealings
Recent purchases or sales of shares by directors may be significant, as well as directors total holdings. What price did the directors buy at?

10. Check brokers' recommendations
I'm not suggesting slavishly following brokers' recommendations, but a decision to buy a share if, say, five out of five brokers rate it a sell is different from buying when five out of five rate it a buy. It's a test of your conviction.
You can get all of this information from a financial website and the company's own website. Apart from the geographic and segmental analysis, it shouldn't even require looking at the company's reports. It should take about half an hour, though maybe longer if you don't have much idea what the company does.

Ideal
Of course it is much better to thoroughly research and analyse a company. The ideal opportunity arises when you have previously researched a share and liked the investment case, but thought it was too expensive. Even better if you have already decided what your maximum entry price would be. Then on a dip you can act swiftly, with just a quick review of recent news to make sure nothing has fundamentally changed.
But things are rarely ideal, and people are rarely as thorough as they mean to be. It's better to spend half an hour than five minutes. Having a checklist such as this provides a discipline to ensure you "kick the tyres" every time. I plan to cut out and keep it myself.

Extract from Investing

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Post Tue Feb 14, 2012 7:56 am by Quibit

Excellent post sriranga!! This is a perfect check list for genuine stock market investors. This list may vary from that of market manipulators.

Manipulators list may include:
-How small the issued share capital of the comapny.
-How many shares are available with the public.
-What is the free float
-Previous highest and lowest price
-Inside information relating to splits, rights and profits.
-Cost of other shareholders shareholdings.
-Information from brokers with regard to forced selling decisions.
-What company article or research report that will be published in the future etc..

(This post is published purely for education purpose and not to encourage any market manipulations)

Post Tue Feb 14, 2012 3:48 pm by sriranga

@Quibit wrote:Excellent post sriranga!! This is a perfect check list for genuine stock market investors. This list may vary from that of market manipulators.

Manipulators list may include:
-How small the issued share capital of the comapny.
-How many shares are available with the public.
-What is the free float
-Previous highest and lowest price
-Inside information relating to splits, rights and profits.
-Cost of other shareholders shareholdings.
-Information from brokers with regard to forced selling decisions.
-What company article or research report that will be published in the future etc..

(This post is published purely for education purpose and not to encourage any market manipulations)


Thanks Quibit for your comment and your post.
Really appreciate.
This post was posted in the month of September 2011 when the down trend started.
Thanks everyone for your valuable feed back.

Post Tue Feb 14, 2012 5:32 pm by kvnnn

Thnx for the list. and where can we get those details and ratios,

Post Tue Feb 14, 2012 8:48 pm by cseguide

good one

madman

Post Tue Feb 14, 2012 9:56 pm by madman

@cseguide wrote:good article to think

Better for market of this type

cseguide

Post Tue Feb 14, 2012 10:53 pm by cseguide

@madman wrote:
@cseguide wrote:good article to think

Better for market of this type
1st post
welcome to the forum madman

avatar

Post Sun Nov 22, 2020 2:00 pm by Quibit

Restart to the Topic

avatar

Post Sun Nov 22, 2020 2:43 pm by jaya

One is LFIN Floating  4.5%

Post  by Sponsored content

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