Welcome to the eighth post. This journey has been rewarding, and I hope my insights have been valuable to you. At the heart of the discussions are critical concepts such as economic moats and business models. However, the crux of every investment decision is valuation. There are various methods to estimate a company's intrinsic value, each with unique advantages and limitations.
My preferred method is the Discounted Cash Flow (DCF) model, which utilizes normalized earnings. This approach allows me to avoid short-term market noise and focus on long-term potential. To ensure accuracy, I validate my DCF results against financial multiples. In industries such as banking, financial services, and insurance, I use the excess returns method. All calculations are performed by me.
This post debuts my Stock Watchlist, which currently features 83 stocks. The goal is to update fair value estimates and review Key Performance Indicators (KPIs) and business models of these companies at least annually. The list will evolve with new additions and occasional removals of coverage. Additionally, at least bi-weekly updates will be provided, sharing revised fair value estimates and a brief analysis of selected companies, including a personal investment perspective.
Let's dive into the watchlist. I'll briefly guide you on how to navigate it, though much of it is intuitive. We'll go column by column:
Ticker Symbol: The primary exchange ticker symbol of the company.
Name: Company name, sorted alphabetically.
Country: The company's headquarters.
Industry: The primary sector in which the company operates.
Date of Last Update: When the last fair value estimate was made.
The next five areas of the list use a color-coded system to convey my assessment in the following categories. The color scale ranges from red, indicating poor performance, to dark green, indicating excellent performance.
Profitability: Evaluated using operating margins, net income margin, normalized net income margin, and free cash flow margin.
Return on Investment: Based on Return on Invested Capital (ROIC), and for banks and insurance companies, also Return on Equity (ROE) and Return on Assets (ROA).
Debt: Analyzed using the Leverage Ratio, Net Debt/EBITDA ratio, and interest coverage.
Growth: Future growth prospects.
Risk: Potential for earnings fluctuation and deterioration.
Business Model / Moat: The stability, resilience, and competitive advantages of the business.
Additional columns include:
FX: The FX rate of the stock price.
Current Price: As of the list's creation date.
Fair Value Today: My current estimated fair value.
Margin of Safety: Calculated as Fair Value divided by Current Price.
Fair Value in 2 Years: Projected fair value in two years (subject to high uncertainty).
Margin of Safety (2 Years): Fair Value in 2 years divided by Current Price.
Market Value: As of the list's creation date.
I hope this guide assists you in navigating and maximizing the potential of the watchlist. Let us begin exploring these thrilling investment opportunities together!
For the future, I plan to improve the list by enriching it with additional information. But this is a work in progress and will take some time.
Please keep in mind that this is not investment advice and this is just my personal opinion on the stocks. It is important to conduct your own research and make informed decisions. But I hope you find it valuable, helpful and inspiring for your personal investing journey. Thanks for reading, sharing and subscribing!
Disclaimer: The information provided in this publication is for educational and informational purposes only and does not constitute financial advice. The content is solely reflective of my personal views and opinions based on my research and is not intended to be used as a basis for investment decisions. While every effort is made to ensure that the information is accurate and up-to-date, the writer makes no representations as to the accuracy, completeness, suitability, or validity of any information in this post and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All readers are advised to conduct their own independent research or consult a professional financial advisor before making any investment decisions.