Sebastiaan Van Hattum
Edited
๐Œ๐ฒ ๐ฌ๐ญ๐ซ๐š๐ญ๐ž๐ ๐ฒ ๐ž๐ฑ๐ฉ๐ฅ๐š๐ข๐ง๐ž๐ I want to be as transparent as possible, so I decided to share my exact strategy with all of you. In general, I watch the companies I own continually. Every 3 months (after most quarterly results are published), I review my complete portfolio and look if there are better opportunities out there. For this analysis, I look at a lot of statistics, but these are the most important indicators: ๐™Š๐™ฅ๐™š๐™ง๐™–๐™ฉ๐™ž๐™ค๐™ฃ๐™–๐™ก ๐™ข๐™–๐™ง๐™œ๐™ž๐™ฃ How big are a company's margins? Can it handle high inflation and wage increases? Does that leave them with money to grow (or pay dividends)? The minimum margin is at least 10%, but higher is better. I look at this over the last 12 months, but also over the last 5 years. Sometimes a company can suddenly have margins of 20+% while they are on average at 3% (for example in the steel industry). The question is then whether these are one-off or structural high margins. I donโ€™t buy the one-offs ๐‘น๐’†๐’•๐’–๐’“๐’ ๐’๐’ ๐‘จ๐’”๐’”๐’†๐’•๐’” Return on Assets (ROA): how much does the company earn with the stuff they own? The higher the better (at least 10%). Again, I compare it to the 5-year ROA, it must be high in the long term. ๐‘ซ๐’†๐’ƒ๐’•/๐‘ฌ๐’’๐’–๐’Š๐’•๐’š How much debt does the company have relative to its equity? Less is better. Preferably under 50. Slightly higher is also allowed, but then the company must compensate for this with cash (or cash flow). ๐‘ช๐’–๐’“๐’“๐’†๐’๐’• ๐‘น๐’‚๐’•๐’Š๐’ Are the debts affordable in the short term? At least 1, preferably 1.5 or higher. ๐™‘๐™ค๐™ก๐™–๐™ฉ๐™ž๐™ก๐™ž๐™ฉ๐™ฎ (๐˜ฝ๐™š๐™ฉ๐™–) Beta is preferably lower than 1,2. Higher beta/volatility (movement) means a higher risk. If I think the risk is too high I donโ€™t buy the company. If a stock has a high beta but has great potential, I invest less to reduce the risk (and my risk profile) ๐‘บ๐’‰๐’๐’“๐’• ๐‘ญ๐’๐’๐’‚๐’• How many shorters are there at the moment? At high percentages (also depends on sentiment, so ranges change quarterly), I don't invest. Possibly I am missing a strong negative signal. When I do have trust in a company, but the short float is high, I invest a lower percentage. ๐‘ฌ๐‘ฝ/๐‘ฌ๐‘ฉ๐‘ฐ๐‘ป๐‘ซ๐‘จ This indicator is similar to the PE ratio, but with some advantages (such as debt and cash included in the calculation). This determines whether a company is attractively priced. The lower the better. Above 25 is basically a no-go. Finally, I donโ€™t want to own too many companies in the same sector to stay diversified. I donโ€™t invest in oil/energy, weapons, or tobacco. If a company is heavily depending on things they canโ€™t control (like commodities), the stats must be extremely good or I just donโ€™t invest. To show how I work, Iโ€™ll share the short version of an analysis as an example (in this case $MSFT (Microsoft) ): Indicators Microsoft: Operational Margin: ๐ŸŸข 42,05% (ttm) / ๐ŸŸข 38,09% (5y average) Return on assets ๐ŸŸ  14,92% (ttm) / ๐ŸŸข 16.66% (5y avg) Debt/equity ๐ŸŸข 47 Current ratio ๐ŸŸข 1,78 Beta (volatility) ๐ŸŸข 0,93 Short float ๐ŸŸข 0,51% EV/EBITDA ๐ŸŸ  21,34 Other considerations: P/B is higher than 10 but acceptable, they have a great moat (search for it If you want to know what a moat is). Debt is a bit high, but they have a lot of cash. The company shows steady growth for years and there are no signs this will change anytime soon. There are no red signals, a few orange signals, but enough strong other indicators. For me, Microsoft was an easy buy (although it was too expensive last year). ๐ˆ๐Ÿ ๐ฒ๐จ๐ฎ ๐ฐ๐š๐ง๐ญ ๐ญ๐จ ๐œ๐จ๐ฉ๐ฒ ๐ฆ๐ž, choose the amount you're comfortable with, and do copy open trades! This is my strategy. If you have any questions, please let me know! Sebastiaan $GER40 $UK100 $NSDQ100 $SPX500
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