Going outside the box

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Nathan Harmon
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2 How I Evaluate a Company going outside the box to augment judgment decisions Going outside the box The company analysis requires Judgment Augment Judgment with 2 key clicks Be more

net Copyright 2009-20132013 All Rights Reserved No recommendation is intended for any company discussed during this session 3 FIRST: Don t Fight the Tape Is money flowing into the market?

1 2 How I Evaluate a Company going outside the box to augment judgment decisions Going outside the box The company analysis requires Judgment Augment Judgment with 2 key clicks Be more assured of the Judgment items Use the internal Judgment help tool...a shortcut to becoming organized Oct 2013 bob.at.seattle@gmail.com Copyright All Rights Reserved No recommendation is intended for any company discussed during this session 3 FIRST: Don t Fight the Tape Is money flowing into the market? Is money flowing out of the market? DOW Ind. Avg. 4 First the SSG 5 Sections 1 Quality of company 2 Quality of management 3 Price 4 Risk 5 Annualized Return (Bottom Line) 1

5 6 First Judgment 1 Quality of company 5 year

Profits on Sales ROE Debt to Equity 3 Price 4 Risk

Projected High Price Projected Low Price Intrinsic

Return (Bottom Line) 6 Later how to insert the URLs 7

straight parallel 5 year Sales growth estimate 5 year

quarter estimates Earnings and Sales (TK6) Insert

2 5 6 First Judgment 1 Quality of company 5 year Projected Sales and Earnings 2 Quality of management Profits on Sales ROE Debt to Equity 3 Price 4 Risk Compare PEG Ratio to Peer and Industry Average Projected High Price Projected Low Price Intrinsic Value (Compounded Growth in reverse) 5 Annualized Return (Bottom Line) 6 Later how to insert the URLs 7 First the SSG 5 Sections 8 Section 1: Judgment Up straight parallel 5 year Sales growth estimate 5 year EPS growth estimate Compare with ACE Insert next two quarter estimates Earnings and Sales (TK6) Insert next 5 years estimated Earnings and Sales Google My 5 year growth estimates = 12% 2

3 9 10 Google Google Abbott labs Do the analysts agree? (15%-18.27%) 18.27%) Dec Dec Dec Dec Does Earnings track Cash Flow Dec Mar Jun Sep Dec

4 13 14 The Judgment Remove Est. Qtr. Data Section 2: Evaluating Management Compare your company with Industry Averages Compare your company with peer companies 2 Qtrs. Est. 2 Yrs. Est Google Internet Content & Info. 4

5 17 18 Section: 2A, 2B, 2C (Alt-D for TK5) Different from TK / NSA? 19 The Judgment Section 3: Are the P/Es showing a trend? If so, compensate the the trend is likely to continue Is the PEG Ratio reasonable (1 or less is good up to 1.5 is considered somewhat acceptable Compare to: Peer companies Industry averages Intrinsic Value Discounted Cash Flow an alternate method of valuing the price (a Warren Buffett-ism) 20 5

High P/E up to 2 times the projected growth rate (Up-Straight-Parallel) 5 year Estimated EPS Growth = 12% 23 The Judgment 24 52

6 21 The Judgment 22 Section 4: Avg. High P/E Start with 1.5 times the EPS Projected Growth Rate If historical growth has been stable and rising, i increase Avg. High P/E up to 2 times the projected growth rate (Up-Straight-Parallel) 5 year Estimated EPS Growth = 12% 23 The Judgment week low = $636 Section 4: Estimated Low Price Normally below the 52 week low Observe when low price occurred If the current price is too high set an alert to be notified when the price falls into the Buy zone 6

7 26 Example Point & Figure chart Point & Figure chart Example company $480 Selected (Google) $845 7

29 30 Intrinsic Value Reverse of Compounded

8 29 30 Intrinsic Value Reverse of Compounded Growth com/fair php?symbol=goog 31 s 32 The Judgment Section 5: 5 Year Potential Does the Annualized Return meet the needs of your portfolio? What are your portfolio needs: Maximum growth Maximum Dividends Diversification Google Facebook Baidu -Yahoo - 8

9 33 34 Current Price $ :1 27:1 Wait for Price of $51?? ABT Current Price $1, :1 ABT % 9

10 37 38 Current Price $ More to come... Let s update the SSG (Not in the handout) 3.8:1 THEN: How do we insert those URLs? (See the last two pages in the handout) 20.6% Google today 10

11 41 42 The Internet Misc. Tools & URLs * Step by step instructions * 11

12 45 46 Highlight the URL below (blue font) and press Ctrl-C. C. Open Toolkit and click on the Web icon at the top of the screen, select Manage Web Links. Click on Add a site. Paste the URL (press Ctrl-V) where it asks for a Web address. Then type a description or copy and paste the description as well as the URL. Put them in Favorites. Do not enter a ticker symbol. You may want to delete the URLs already there if using Toolkit 4 or 5 as most are outdated. In Toolkit 6, those preceded by an asterisk cannot be removed or edited. Step by step instruction s Company/ Favorite Better Investing -- The Internet Websites * * 47 Company/ Favorite Websites 48 For: NSA and Classic day moving average com/q/ta?t URLs Toolkit * 12

$s=$*+analyst+estimates\ 51 52 Going outside the box Going outside the box For questions not answered here Email: bob.at.seattle@gmail.$ com My website: www.bob-adams.

13 A 5 Year EPS - ACE Going outside the box Going outside the box For questions not answered here bob.at.seattle@gmail.com My website: No recommendation is intended for any company discussed during this session For questions not answered here bob.at.seattle@gmail.com My website: No recommendation is intended for any company discussed during this session Questions/Comments 13

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