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Flashcards in Investing in Stocks Deck (47):
1

4 Ms to investing in company stock

meaningful to you
moat (you must iD the moat)
management
margin of safety

2

meaningful

it has meaning to you and you would own it
as if it your life depended on it

3

10:10 rule

u wouldn't own it for 10 minutes unless u
would own it for 10 years

4

5 moats

brand
trade secret
exclusive control
ubiquitous in everything you do
lowest prices

5

5 big # companies must have

ROIC or ROC growth
Sales growth
EPS growth
Equity growth
cash growth

6

the 5 big # must meet _____ in all 5 # for
the past _____, ______, ______, and _____.

10% growth
10 yr
5 yr
3 yr
1yr

7

equity is aka as _____

book value per share (bvps)

8

rule # 1

never lose money

9

3 keys to investing

determine worth
buy at 50% off
sell when it's overpriced

10

where do you find equity and debt #?

balance sheet

11

where do you find sales and EPS #?

income statement

12

where do you find cash #?

cash flow statement

13

ROIC

return of investment capital

14

BVPS

book value per share

15

free cash is the _____ minus the _____.

cash out
cash in

16

rule of 72

take the # 72 and divide it by the interest
rate and you will get the # years it will take
to double your money

17

# years to double your money = _____

72/interest rate

18

interest rate =

72/# years to double money

19

growth rate approximations are calculated
by taking the ______ divided by ______
which will give you the avg. years it takes
to _____. the growth rate is then
approximated using the _____.

# of times that it doubles
the total years
double
rule of 72

20

the most important growth # (of the 4
that we have to calculate) is _____. this
is because the "sticker price" is the _____
and it will most closely follow the _____.

equity growth
value of the company
equity growth

21

priority of growth rates

#1 equity growth
#2 EPS growth
#3 sales growth
#4 free cash growth

22

the single most important # is _____

ROIC growth

23

ROIC =

(net operating profit after tax)
divided by
(equity - debt)

24

MOS is created by buying the stock _____.

at 50% less than the sticker price

25

the sticker price is the _____ of the stock
that the market _____ be selling the stock.

fair value or retail price
should

26

to calculate the sticker price u need 4 #

current EPS
estimated EPS growth rate
estimated future PE
minimum acceptable rate of return

27

the sticker price is calculated by knowing
the amount of money a business is going
to make in the ______.

future

28

future market price =

(future PE)(future EPS)

29

ttm EPS

trailing 12 month EPS

30

most important # for determining future
EPS is _____.

the equity growth rate

31

growing equity comes from _____ and this
is what makes a business valuable.

surplus cash

32

sticker price determination has 3 steps

1) grow current EPS using estimated EPS
growth rate for 10 yr.
2) multiply future EPS by future PE
3) shrink future market price by the
minimum acceptable rate of return per year

33

if the market thinks a company is going to
grow really fast then it will give it _____.

a high PE

34

quick rule of thumb for future PE is _____

double the estimated EPS growth rate. this
is called the default PE.

35

PE =

Price/EPS

36

PE is how much we are willing to pay ____.

for a dollar's worth of company earnings

37

default PE =

double the estimated EPS growth rate

38

pick the lower PE from the 2 following

historical PE or default PE

39

pick the lower estimated EPS growth rate
from the 2 following

analysts estimated EPS growth rate
historical estimated EPS growth rate

40

minimum rate of return is at least _____.

15%

41

use rule of 72 to determine _____. take 72
and divide it by estimated EPS growth rate
to determine _____. then determine how
many times it will double in _____. use
_____ and calculate future EPS

future EPS
# of years to double
10 years
current EPS

42

because we use ____ as our minimum
rate of return and we use the rule of 72,
the sticker price will double _____ in 10
year; therefore our sticker price will always
be _____ of the future market price.

15%
twice
1/4

43

2 times to sell

when the company is no longer wonderful
market price > sticker price

44

market cap

price/share times all the shares

45

3 tools to determine when to buy/sell

MACD
Stochastics
Moving Averages

46

use past BVPS to determine the years it
took to double, then find the avg. years it
took to double and divide 72 by it. this =

equity growth rate

47

operating cash flow

the cash created from profitable operations
before it buys equipment or pays dividends