Reading Notes (430)

Dorsey, Pat. The Five Rules for Successful Stock Investing: Morningstar’s Guide to Building Wealth in the Market, 2004. (HG4521. D646 or 332.63 22 dc22)

Five Rules:

1. Do your homework.
2. Find economic moats – a firm’s competitive edge.
3. Have a margin of safety – buy stock for less than they’re really worth.
4. Hold for the long haul.
5. Know when to sell

– you make a mistake
– the fundamentals have deteriorated
– stock has risen well above its intrinsic value
– better other opportunities
– taken up too much space in your portfolio

Analysis a company

1. Growth
2. Profitability: free cash flow
3. Financial health: ROE, Debt to Equity, EBIT, Quick Ratio
4. Risk Bearance
5. Management: competitive, character

Valuation

– Price to Sales (P/S)
– Price to Book (P/B)
– Profit Earning Ratio (P/E)
– P/E to Growth Ratio (PEG )
– Yield