Hello everyone. Today, I’ll share a handy trick with you – my way of finding great investment targets in 60 minutes! Now, please keep in mind that this isn’t a detailed guide where I explain all of the things you need to do before you invest. I cover those in my courses Instead, I’ll give you a short version of my initial “evaluation” process that helps me decide if a stock is worth actually researching.
Before we jump right in, I want to throw in a quick reminder to like and share the blog if you enjoy my content and want to see our community grow. Every little bit helps! Also, if you are serious about long-term investing, you should apply for our Private Investing group and gain access to all my courses, exclusive content, and detailed stock analysis. Check out my other blogs such as, “Defining The Purpose Of Wealth“.
Do you know how I always tell you that long-term investments need a lot of research? I advise about how you should always spend at least one afternoon’s worth of time reading and looking at reports before giving a company your hard-earned cash? If that sounds like a lot of time and effort, that’s because it is. But, if you have a career or business to take care of on top of that, spending so much energy on every stock that seems interesting isn’t exactly sustainable in the long run. You might manage it at first, but eventually, you will burn yourself out. Or even worse – you risk overlooking some critical detail and making a costly mistake.
To avoid this, I have developed a simple but really effective method that allows me to find good stocks in as little as 60 minutes. And, today, I’ll tell you all about it.
We’re going to look at how to find a good investment:
It all starts with an idea
As always, you need some sort of inspiration. It could be an Ad, a product you see at the store, or even something you see in a TV show.
Let’s say you see a new food brand at your local store. And not just that, but you see people buying it or being excited about it. So, you go online and look it up.
You open up Google, and you check to see if this is a public company.
This is the first big turning point. Because, if you’re not dealing with a public company, you need some other idea.
Now, for the sake of our example, we’re going to assume that the company we chose is a public company. This means you can invest in it – you can go on your account and start buying shares immediately. Or, well, you could do that. But you aren’t going to blindly rush into it. Instead, you’re going to move on to the next step of the procedure: you look at the business.
The business and its stats
Luckily, you already know a couple of things about this business:
Since it’s a product that you only heard about recently, then it’s probably not very old. And, since you haven’t noticed any massive marketing campaigns about it just yet, it probably comes from a company that’s still growing.
There are 2 things you can do here:
Have a look at the financial stats (which is what most people read my stock analysis blogs for) or look at the business itself.
I suggest that you begin by looking at the business before diving into the financial stats and balance sheets. Because, as I often say, you should never give your money to a company you don’t believe in.
No matter how great their financials look, if the business doesn’t look promising over the long run, it’s probably not a good long-term investment.
So, you want to look for as much information as possible – news, interviews, media coverage, company history, product releases, and so on. But don’t bury yourself in these just yet. Instead, quickly skim through the information and save the links in a notepad or spreadsheet. Set yourself a limit of maybe 20 to 30 minutes for this part. If you decide that you like the business, you can return to your spreadsheet later and read everything in detail.
Using this information, you will be able to form an understanding of the business. Now, you can go and look at how their products are doing in their field. Look at the category and growth year-to-year. You want at least a 15-20% growth year-to-year. Do they have that? Great. This means you can move on to the next step: the financials.
Here, you want to focus on a couple of things:
- Point 1 – Balance sheet
- Point 2 – Cash & Cash Equivalents and long-term investments
- Point 3 – Short and long term debt
- Point 4 – Income Statement
- Point 5 – P/E Ratio
A solid balance sheet means that the company is likely to recover from hiccups or unexpected roadblocks.
Cash vs debt
Now, sum up everything in point 2 and compare it to point 3. You are looking for at least a 2:1 ratio. The more cash they have versus debt, the safer the company is. And that’s exactly what you want from a long-term investment – safety and stability.
For the income statement, only focus on the last 3 years. You’re looking at revenue and profits. Ideally, the company will be demonstrating steady growth in both categories. But a few minor hiccups here and there don’t automatically make it a bad investment. It just means more research to figure out why it happens.
Usually, I am for businesses with a P/E ratio under 17. The only exception here is fast-growing companies, where I can make an exception. For example, if they had XXX% growth last year, I will consider a P/E of YY.
Of course, there is also a limit to this. I will never invest in a company with a p/e above 50, no matter how fast it’s growing.
Congratulations, you just found a company that deserves a full research session! Now is the time to go back to your list of information, articles, presentations, interviews, and conference calls and get digging. And, even if it turns out that now is not the best time to invest, you should definitely keep an eye on it.
Alternatively, you could also just join our private investing group and immediately get access to ALL of my courses, along with a ton of exclusive content and the ability to directly contact me with any questions! In the group, you’ll get to meet other like-minded long-term investors and take part in our detailed discussions and stock analysis. A link to this is also in the description.
I really hope that you like my blog and my short guide, my little tricks on how to find a stock in 6o mins,
If you have any questions about this method, ideas about future blogs, or if you’d like to cover a specific company, let me know in the comments section below! And, of course, don’t forget to give this blog regarding how to find a good investment a thumbs up and share it with your friends!
Thank you all for being with me here today, and until next time!
Recommended for further reading:
- Eat That Frog! – Brian Tracy
- Key Person of Influence – Daniel Priestley
- To Sell Is Human: The Surprising Truth About Moving Others (by Daniel Pink)
- Jab, Jab, Jab, Right Hook: How to Tell Your Story in a Noisy Social World
- The New One Minute Manager – Kenneth Blanchard