THE DO'S AND DON'TS OF STOCK SELECTION

Transcription

1 A Publication of Wealth Advisor Publishing, Inc. Brings you the following Webcast THE DO'S AND DON'TS OF STOCK SELECTION PRESENTED BY: LOUIS P. STANASOLOVICH, CFP CCO, CEO AND PRESIDENT 5700 CORPORATE DRIVE, SUITE 350 PITTSBURGH, PENNSYLVANIA PHONE: (412) or (888)

2 In order to monitor attendance for CPA CPE Credits there will be three (3) polling questions at the end. We will show the answers to the polling questions at various times during the presentation. At the end of the presentation you will be required to answer all three (3) questions in order to obtain your CPE Credit.

3 IN ORDER TO RECEIVE A CERTIFICATE OF COMPLETION FOR CPA CPE YOU MUST: Attend the Webcast for a minimum of 50 minutes. And answer all three polling questions correctly. A Certificate of Completion will be ed to you within two weeks of the Webcast.

4 A Service of Wealth Advisor Publishing, Inc. With regard to obtaining CFP Continuing Education Units (CEU) credits, as long as you have entered all of your information correctly when registering for this webcast, you will receive confirmation from the CFP Board shortly that you have received credit. However, if you did not enter your CFP number, or entered it incorrectly, then you will need to contact the CFP Board Toll-Free at (800) or at to see if you are still able to obtain credit. With regard to obtaining CEU from IMCA, you will receive an notification as an acknowledgement and/or certificate of completion of your successful attendance of this Webcast. If you previously provided us with your I.D. number when you registered, we will submit your I.D. number to IMCA so you can receive Credit but, you will need to save the notification as proof you attended to receive credit for attending this Webcast.

5 Lou Stanasolovich, CFP, CCO, CEO Lou is founder, CEO and President of Legend Financial Advisors, Inc. and EmergingWealth Investmtent Management, Inc. Lou was selected by Financial Planning magazine as one of only six individuals to receive an inaugural Influencer Award for Lou was selected for the Wealth Creator award recognizing the advisor who has made the most significant contributions to best practices for portfolio management. He is one of only four advisors nationwide to be selected 12 consecutive times by Worth magazine as one of The Top 100 Wealth Advisors in the country. Lou has also been selected six times by Medical Economics magazine as one of The 150 Best Financial Advisors for Doctors in America He has twice been named one of The 100 Great Financial Planners in America by Mutual Funds magazine. Lou has been named three times to Investment Advisor magazine s IA 25 list, ranking the 25 most influential people in and around the financial advisory profession. Lou was profiled in Financial Planning magazine as one of the country s Movers & Shakers recognizing the top individuals who have done the most to advance the financial advisory profession.

6 RESEARCH SOURCES: 1. Zacks Investment Research, Inc. (Zacks) 2. Ford Equity Research 3. Bloomberg Investment Service 4. Standard & Poor s (The Mcgraw-hill Companies, Inc.) 5. Morningstar.Com 6. Bloomberg News Service 7. Thomson Reuters 8. Company Watch Limited 9. Yahoo.com

7 KEY TERMINOLOGY YOU MUST KNOW 1. Earnings Per Share (EPS) 2. Earnings Per Share Surprises 3. Earnings Growth Rate 4. Price-To-Earnings Ratio 5. Price-To-Cash Flow Ratio 6. Price-To-Free Cash Flow Ratio 7. Price-To-Book Value Ratio 8. Price-To-Sales Ratio 9. Capitalization Total Outstanding Shares x Market Price 10. Return on Equity (ROE) 11. Average Daily Volume = Number of Outstanding Shares Traded Daily

8 INVESTMENT OBJECTIVES 1. We Seek Capital Appreciation Consistent With Moderate Levels Of Risk 2. The Portfolio Provides Exposure To Domestic Equities And Foreign ADR s With Various Market Capitalizations Representing Multiple Industries In Various Phases Of Maturity

9 INVESTMENT PHILOSOPHY Our Mission Is To Achieve Our Objective Of Capital Appreciation While Managing Risk. We Accomplish This For Our Clients By: 1. Employing Fundamental Analysis, Industry Analysis, And Relative Value-Based Investing Concepts 2. Constructing Diversified Portfolios Utilizing Various Industry Sectors To Moderate Risk 3. Periodically Applying Stop-Sell Orders To Lock-In Gains And Limit Securities Downside 4. Hold Cash When Equity Opportunities Are Not Available At Attractive Valuations

10 THE DON TS OF STOCK SELECTION 1. Common Stock Selection Mistakes a. Not Understanding The Basics Of Investing In Stocks i. Go To School (Investopedia) ii. Read Books: The Classics - Benjamin Graham iii. Read Great Financial Reports Berkshire Hathaway Commentary Section b. Not Doing Your Homework i. Be Research Driven c. Buying The Story Not The Stock d. Buying The Company Not The Stock e. Trying To Keep Up With Friends And Neighbors f. Ignoring The Fundamentals g. Letting The Tax Tail Wag The Investment Dog h. Reading And Listening To Financial Pornography i. ii. Blogs By Amateurs Consumer Magazines/Electronic Media From Non-Credible Sources

11 THE DON TS OF STOCK SELECTION MISTAKES - (Continued) i. Short-Term Focus Results In Lower Negative Returns j. Worrying About The Volatility Of Stocks k. Not Knowing When To Buy l. Not Knowing When To Sell m. Not Protecting Yourself From The Downside n. Not Buying Enough Stocks o. Buying Too Many Stocks p. Worrying About Having Too Much Cash In The Portfolios q. Investing In Stocks You Can t Understand

12 POLLING QUESTION ANSWER #1 THIS IS THE ANSWER FOR POLLING QUESTION NUMBER 1 THE POLL WILL BE PRESENTED AT THE END OF THE WEBCAST

13 LEGEND S BASIC CRITERIA FOR SELECTING STOCKS 1. Sales Must Be Rising. 2. Stocks Should Have P/E Ratios, Price-To-Cash Flow Ratios And PriceTo-Free Cash Flow Ratios Of 30 Or Less. 3. Earnings Growth Rates For Current Year And Following Year Should Be At Least 40.0% Higher Than P/E Ratios, Price-To-Cash Flow Ratios And Price-To-Free Cash Flows. 4. Liquidity - Volume Should Be At A Level So That The Purchase Amount Does Not Exceed 10% Of The Stock s Daily Volume The Really Small Stock Syndrome. 5. When Purchasing A Stock, Do Not Purchase More Than 2.5% Of A Portfolio s Total Value. 6. No Stock Should Be More Than 5.0% Of A Portfolio s Total Value, Even After Appreciation. If Necessary, Sell Off The Amount That Exceeds 5.0%.

14 LEGEND S BASIC CRITERIA FOR SELECTING STOCKS (Continued) 7. Return-On-Equity Should Exceed 10.0% For Last Five Years. 8. Debt-To-Capitalization Should Generally Not Exceed 50.0% But Is Dependent On The Industry. Ex. Banks Would Be An Exception. 9. Ideally, Companies Should Not Have Missed Their Earnings Estimate Over The Last 12 Months. 10. Analyst Estimates For Companies Future Earnings Should Generally Be Rising. 11. Earnings Estimates Should Be Rising In A Steady Manner (Avoid Volatility For Earnings Although This Can Be Dependent Upon Industry). 12. Net Margins Should Be At Least Competitive To Peers 13. The H-Score (A Score For Financial Stability) Should Generally Be 70 Or More (Never Below 50). 14. Insiders Should Be Buying Or At Least Not Selling The Stock.

15 DIVERSIFICATION 15. Invest Across Sectors 16. Manage Sector Exposure: 25% Maximum 17. Diversify Holdings: Positions Position Size 2%-5%

16 ONGOING INTERNAL CONTROLS 1. Monitor Earnings Estimate Revisions 2. Compliance With Portfolio Objectives/Restrictions 3. Research For Positive & Negative Analyst Reports 4. Review Daily News Reports Regarding Each Holding 5. Periodically Institute Stop-Sell Orders To Minimize Risk

17 SELL DISCIPLINES 1. Downward Earnings Trend 2. Negative Earnings Surprises 3. Reduced Earnings Expectations 4. Fully Valued 5. Merger And Acquisitions Activity 6. New Company Management 7. Heavy Insider Selling 8. Extremely Negative Company Specific News 9. Rising Accounts Receivables, Rising Inventories, Rising Debt, High P/E And Slowing EPS Growth, Significant Variance Between Operating Earnings And Consensus Earnings

18 POLLING QUESTION ANSWER #2 THIS IS THE ANSWER FOR POLLING QUESTION NUMBER 2 THE POLL WILL BE PRESENTED AT THE END OF THE WEBCAST

19 CANDIDATES PURCHASED Thru June 20, 2014 PERCENTAGE INCREASE/ DECREASE S&P 500 INCREASE/ DECREASE STOCK SYMBOL DATE PURCHASED Southwest Airlines Co. LUV 7/31/ % % QCOR 4/26/ % % LEA 4/16/ % 5.81 % Questcor Pharmaceuticals, Inc. Lear Corporation

20 SOUTHWEST AIRLINES COMPANY (LUV)

21 SOUTHWEST AIRLINES (LUV)

22 SOUTHWEST AIRLINES (LUV)

23 SOUTHWEST AIRLINES (LUV) THOMSON REUTERS I/B/E/S ESTIMATES EARNINGS VALUATION REPORT STOCK PRICE AND RECOMMENDATION HISTORY

24 SOUTHWEST AIRLINES (LUV) THOMSON REUTERS I/B/E/S ESTIMATES EARNINGS VALUATION REPORT

25 SOUTHWEST AIRLINES (LUV) THOMSON REUTERS I/B/E/S ESTIMATES EARNINGS VALUATION REPORT

26 SOUTHWEST AIRLINES (LUV) THOMSON REUTERS I/B/E/S ESTIMATES EARNINGS VALUATION REPORT

27 QUESTCOR PHARMACEUTICALS, INC. (QCOR)

28 QUESTCOR PHARMACEUTICALS, INC. (QCOR)

29 QUESTCOR PHARMACEUTICALS, INC. (QCOR)

30 QUESTCOR PHARMACEUTICALS, INC. (QCOR) THOMSON REUTERS I/B/E/S ESTIMATES EARNINGS VALUATION REPORT

31 QUESTCOR PHARMACEUTICALS, INC. (QCOR) THOMSON REUTERS I/B/E/S ESTIMATES EARNINGS VALUATION REPORT

32 QUESTCOR PHARMACEUTICALS, INC. (QCOR) THOMSON REUTERS I/B/E/S ESTIMATES EARNINGS VALUATION REPORT

33 QUESTCOR PHARMACEUTICALS, INC. (QCOR) THOMSON REUTERS I/B/E/S ESTIMATES EARNINGS VALUATION REPORT

34 LEAR CORPORATION (LEA)

35 LEAR CORPORATION (LEA)

36 LEAR CORPORATION (LEA)

37 LEAR CORPORATION (LEA)

38 LEAR CORPORATION (LEA)

39 LEAR CORPORATION (LEA)

40 LEAR CORPORATION (LEA) THOMSON REUTERS I/B/E/S ESTIMATES EARNINGS VALUATION REPORT

41 LEAR CORPORATION (LEA) THOMSON REUTERS I/B/E/S ESTIMATES EARNINGS VALUATION REPORT

42 LEAR CORPORATION (LEA) THOMSON REUTERS I/B/E/S ESTIMATES EARNINGS VALUATION REPORT

43 LEAR CORPORATION (LEA) THOMSON REUTERS I/B/E/S ESTIMATES EARNINGS VALUATION REPORT

44 QUESTIONS AND ANSWERS

45 POLLING QUESTION ANSWER #3 THIS IS THE ANSWER FOR POLLING QUESTION NUMBER 3 THE POLL WILL BE PRESENTED AT THE END OF THE WEBCAST

46 IN ORDER TO RECEIVE A CERTIFICATE OF COMPLETION FOR CPA CPE YOU MUST: Attend the Webcast for a minimum of 50 minutes. And answer all three polling questions correctly. A Certificate of Completion will be ed to you within two weeks of the Webcast.

47 POLLING QUESTIONS

48 A Service of Wealth Advisor Publishing, Inc. With regard to obtaining CFP Continuing Education Units (CEU) credits, as long as you have entered all of your information correctly when registering for this Webcast, you will receive confirmation from the CFP Board shortly that you have received credit. However, if you did not enter your CFP number, or entered it incorrectly, then you will need to contact the CFP Board Toll-Free at (800) or at to see if you are still able to obtain credit. With regard to obtaining CEU from IMCA, you will receive an notification as an acknowledgement and/or certificate of completion of your successful attendance of this Webcast. If you previously provided us with your I.D. number when you registered, we will submit your I.D. number to IMCA so you can receive Credit but, you will need to save the notification as proof you attended to receive credit for attending this Webcast.

49 Contact Information Wealth Advisor Publishing, Inc. (Publisher of Global Economic & Investment Analytics) 5700 Corporate Drive, Suite 340 Pittsburgh, PA Phone: (877) Fax: (412) Legend Financial Advisors, Inc Corporate Drive, Suite 350 Pittsburgh, PA Phone: (412)