Before investing in a stock or other investment. Just curious the levels some of you folks go in doing your homework. I assume the level of investment, type of investment or associated risk drives the amount of research?

Like a fundamental analysis or a trade? Totally different things.

$30,000 Millionaire said:

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Like a fundamental analysis or a trade? Totally different things.

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Right I alluded to that but probably could have been more clear. I assume for a trade most are just looking at some small signals that show that a trade is the smart play. I'm talking more long term investments. I am mostly a buy and hold guy and would like to start being a little more active with my portfolio so I'm just curious how others approach their levels of DD. The most I have done was when buying a house as an investment and I think I should probably do that level with any long term investments.

I assume you're making a sizable investment if those people will talk with you. Not trying to pry for personal information, but I imagine those folks won't talk with a man on the street.

YouBet said:

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I think your focus criteria is a smart approach. I've always found P/E, ROE, and stats like that to be noise at the end of the day. I'm sure I will get disagreement here and that's fine, but I've come to look at much of it like all of the meaningless stats that sports nerds and the NFL have dreamed up over the years for football.

Revenue, profitability, and sector lead should lead like you said. And then pay attention to evolutionary leaps in innovation and macro trends. Having said that, I invest in few individual stocks and at least have the ones I want via funds, otherwise.

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I wouldn't say it's necessarily noise, but I would say with the computing power and algorithms that have existed in the last 20 years renders it information that has already been valued in. It's silly to think the common investor just stumbles upon a stock and checks its P/E, ROE, etc... and comes out knowing there's a ton of value in it when a computer algorithm looking at that same data a hundred times a day is unable to see that value.

Sure there's some people that will claim their deep dives into a company's financials has produced these winners that the common investor hasn't been able to spot. But the majority of the time it's just as self-serving cognitive bias... Did the market as a whole produce similar winners? There's always winners and losers, are you attributing the result of a coin flip to skill? It's no different than the guys who crunch all the stats for a sports bet and use that as proof it was a sound wager when reality is the coin flip just ended up "tails".

So as $30,000 Millionaire said -- I think it's far more useful to view things from the "what do I think will be the future?" angle. Where do I have information that the common public might not? (Not insider trading, simply knowing the future of an industry that the financials pulled into an algo doesn't necessarily see).

I wait until the CEO looks for significant real estate in a second home market. I ask him if he is about to retire. If he says no, load up on their stock. It has worked every time. Something big is about to drop for them.

YouBet said:

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I think your focus criteria is a smart approach. I've always found P/E, ROE, and stats like that to be noise at the end of the day. I'm sure I will get disagreement here and that's fine, but I've come to look at much of it like all of the meaningless stats that sports nerds and the NFL have dreamed up over the years for football.

Revenue, profitability, and sector lead should lead like you said. And then pay attention to evolutionary leaps in innovation and macro trends. Having said that, I invest in few individual stocks and at least have the ones I want via funds, otherwise.

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except when the PE is ridiculously low. good example this year is NUCOR.

I realize steel companies generally have low PEs because of the nature of the industry, but NUCORs PE was running around five earlier this year.

Now their PE is 7.84 and the stock has increased 25% in the last 12 months.

txaggieacct85 said:

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YouBet said:

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I think your focus criteria is a smart approach. I've always found P/E, ROE, and stats like that to be noise at the end of the day. I'm sure I will get disagreement here and that's fine, but I've come to look at much of it like all of the meaningless stats that sports nerds and the NFL have dreamed up over the years for football.

Revenue, profitability, and sector lead should lead like you said. And then pay attention to evolutionary leaps in innovation and macro trends. Having said that, I invest in few individual stocks and at least have the ones I want via funds, otherwise.

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except when the PE is ridiculously low. good example this year is NUCOR.

I realize steel companies generally have low PEs because of the nature of the industry, but NUCORs PE was running around five earlier this year.

Now their PE is 7.84 and the stock has increased 25% in the last 12 months.

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So do you believe that the algos out there just ignored the easy 25% return?

Sea Speed said:

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Before investing in a stock or other investment. Just curious the levels some of you folks go in doing your homework. I assume the level of investment, type of investment or associated risk drives the amount of research?

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not enough.

I always check insider transactions; especially if there are sales

I pay people to do that for me.

Spaceship said:

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dallasiteinsa02 said:

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I wait until the CEO looks for significant real estate in a second home market. I ask him if he is about to retire. If he says no, load up on their stock. It has worked every time. Something big is about to drop for them.

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Good plan but how do you identify a CEO who's about to buy a second home?

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I just ask them. I'm on a text thread with most of them.