I do not have a fixed source of investments. I try to remain as open as possible to new ideas.

In the past my ideas have come from:

• The screening of stock markets world-wide using time tested investing criteria such as low price to earnings, high return on equity, low debt and low price to book ratios.

• Interesting companies read about in books, magazines or internet

• Unusual companies mentioned by family and friends

• Following investments of fund managers we admire

• Discussions with fellow investors and newsletter readers

I however know my limits and do not invest in companies we do not understand.

Once I have identified an interesting company we conduct a financial analysis which consists of the following:

• I analise the company using a minimum of seven years of financial data

• I work through a check list of more than 75 points which we have put together over many years of reading and practical experience

• The check list allows me to quickly identify where we have to dig deeper into the financial statements of the company

• I focus strongly on cash flows as they are less prone to accounting manipulation and is the real life blood of any company

• I avoid companies with high levels of debt preferring companies that are not capital or asset intensive that generates a lot of free cash flow
  

• Should a company pass our checklist we read through the annual, interim and quarterly financial reports to get to know the management and the business of the company

 Once I am satisfied with all of the above do I invest

Financial analysis example (PDF 27 KB)  

Also have a look at:

My Investment Philosophy 

Our Expert

P.S.   A company the market forgot about

Last month while running my stock screeners to find attractively valued companies I stumbled onto something that will interest you.

As you know I look for the absolute cheapest companies in Europe, the UK and the USA, irrespective of size and market they are trading on.

This time however I discovered “a gem lying in plain sight”.

It’s a really large company (that you can buy nearly anywhere) that has gotten really cheap. But is so large and obvious that it is completely overlooked by the market.

Something like a diamond lying on the sidewalk, you do not believe that it is a diamond and thus ignore it as you walk by.

Another reason I like the company it that it recently got rid of quite a large millstone around its neck, another factor that should help it perform better in future.

I immediately analysed the company and recommended it to my subscribers.


To find out how you can also get ideas like this monthly click here.