Investing in Stocks

Question 1

4 Ms to investing in company stock

Answer 1

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

Question 2

meaningful

Answer 2

it has meaning to you and you would own it

as if it your life depended on it

Question 3

10:10 rule

Answer 3

u wouldn’t own it for 10 minutes unless u

would own it for 10 years

Question 4

5 moats

Answer 4

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

Question 5

5 big # companies must have

Answer 5

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

Question 6

the 5 big # must meet _____ in all 5 # for

the past _____, ______, ______, and _____.

Answer 6

10% growth
10 yr
5 yr
3 yr
1yr

Question 7

equity is aka as _____

Answer 7

book value per share (bvps)

Question 8

rule # 1

Answer 8

never lose money

Question 9

3 keys to investing

Answer 9

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

Question 10

where do you find equity and debt #?

Answer 10

balance sheet

Question 11

where do you find sales and EPS #?

Answer 11

income statement

Question 12

where do you find cash #?

Answer 12

cash flow statement

Question 13

ROIC

Answer 13

return of investment capital

Question 14

BVPS

Answer 14

book value per share

Question 15

free cash is the _____ minus the _____.

Answer 15

cash out

cash in

Question 16

rule of 72

Answer 16

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

Question 17

years to double your money = _____

Answer 17

72/interest rate

Question 18

interest rate =

Answer 18

72/# years to double money

Question 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 _____.

Answer 19

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

Question 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 _____.

Answer 20

equity growth
value of the company
equity growth

Question 21

priority of growth rates

Answer 21

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

Question 22

the single most important # is _____

Answer 22

ROIC growth

Question 23

ROIC =

Answer 23

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

Question 24

MOS is created by buying the stock _____.

Answer 24

at 50% less than the sticker price

Question 25

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

Answer 25

fair value or retail price | should

Question 26

to calculate the sticker price u need 4 #

Answer 26

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

Question 27

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

Answer 27

future

Question 28

future market price =

Answer 28

(future PE)(future EPS)

Question 29

ttm EPS

Answer 29

trailing 12 month EPS

Question 30

most important # for determining future | EPS is _____.

Answer 30

the equity growth rate

Question 31

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

Answer 31

surplus cash

Question 32

sticker price determination has 3 steps

Answer 32

``` 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 ```

Question 33

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

Answer 33

a high PE

Question 34

quick rule of thumb for future PE is _____

Answer 34

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

Question 35

PE =

Answer 35

Price/EPS

Question 36

PE is how much we are willing to pay ____.

Answer 36

for a dollar's worth of company earnings

Question 37

default PE =

Answer 37

double the estimated EPS growth rate

Question 38

pick the lower PE from the 2 following

Answer 38

historical PE or default PE

Question 39

pick the lower estimated EPS growth rate | from the 2 following

Answer 39

analysts estimated EPS growth rate | historical estimated EPS growth rate

Question 40

minimum rate of return is at least _____.

Answer 40

15%

Question 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

Answer 41

future EPS # of years to double 10 years current EPS

Question 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.

Answer 42

15% twice 1/4

Question 43

2 times to sell

Answer 43

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

Question 44

market cap

Answer 44

price/share times all the shares

Question 45

3 tools to determine when to buy/sell

Answer 45

MACD Stochastics Moving Averages

Question 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 =

Answer 46

equity growth rate

Question 47

operating cash flow

Answer 47

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