How to Pick Winning Stocks!

How to Pick Winning Stocks! www.spikedfinance.com Text Us: 647-793-1139 Follow Us: @DanielSharma @SpikedFinance

www.spikedfinance.com I am a long term investor, your strategies are not wrong. I am a value and growth investor. I believe in Warren Buffett’s methodologies. My techniques are very simple but odd. BEWARE:

Overview

www.spikedfinance.com Common Question: How do I start investing?

www.spikedfinance.com • Step 1: Look at a stock as a business. • It will simplify your thinking! • Step 2: Pick a business you understand! • Commodities, financial, technology, real estate, etc. • Step 3: Figure out how much the business is worth, not the stock. • Don’t look at price. Don’t value price! • Step 4: Look at the fundamentals not economic data. • I like to call this noise! • Ignore the news, it has nothing to do with stock picking. • Step 5: Control your emotions. • Greed, fear, uncertainty, speculation, discipline, game plan. Guidelines to Picking Winning Stocks

www.spikedfinance.com “The best holding period is forever” –Warren Buffett. INVESTING TRADING

www.spikedfinance.com They want to make QUICK money now rather than later. Example: In 2011: Today their company has been shut down due to a lawsuit. 100’s of people lost their money. Moral of story: Don’t believe in promises. Why do Investors FAIL at picking stocks?

www.spikedfinance.com People value price. Example: Another reason…

www.spikedfinance.com What actually happened:

www.spikedfinance.com Investing in Stocks Is Just Like Gambling. Fallen Angels Will Go Back up, Eventually. Stocks That Go up Must Come Down. Some more mistakes:

www.spikedfinance.com • Look for good companies that are undervalued. A good indicator is the P/E Ratio (Price to Earnings Ratio). THIS IS JUST ONE INDICATOR • P/E Ratio is a valuation tool that tells you how much the price is trading compared to its earnings. In other words, is it overvalued or undervalued? • P/E ratio also tells you how much price you are paying for $1 of earnings. • High P/E Ratio states that investors are look for greater growth return in future. • I like P/E Ratios that are 15 or lower. • Less expectations for the future means if higher probability company will do well. • Cheap price. • Method has worked before How do you value a business?

www.spikedfinance.com • June 2013 P/E was around 15. And price $14. • April 2014 P/E was 22.44. And Price $20.84. • Why I bought this company? • Undervalued. • Good Company • High Cash • Low Debt • Perfect Inventory Turnover • Niche Market Examples:

www.spikedfinance.com My Thought Process: • If the stock exchange were to close would I be happy with this company? Yes because of profitability. • Do I understand their operations? Yes, they will sell soft drinks today and 50 years down the road. • What aspects of the business gives it value? • Cheap products, but good quality. • Niche Market. • Competitive advantage in the market, which builds a moat around their business. • Do their assets have value? Example: patents? National Beverage Corporation (FIZZ)

www.spikedfinance.com ACE Limited

www.spikedfinance.com Low P/E ratio vs the Market! Low P/E stocks are more volatile than high P/E stocks. In good times they will outperform the market and in bad times underperform. But they are worth it in the long term! The value ETF has a return that is double the markets return! Value Companies are worth it! S&P 500 (BLUE) VSS&P 500 PURE VALUE ETF (RED)

www.spikedfinance.com Here are my guidelines: Do not invest in penny stocks. Make sure the company has been running for at least 7 to 10 years. Make sure you understand the business. Make sure they are consistent with their profits (you are going to have bad years) and able to grow their sales. Make sure they have low debt and strong cash flow! Cash is king! Current Ratio = Current Assets/Current Liabilities= 2:1 Debt Ratio = Debt/Equity = 0.5:1 How do you know a stock is safe to invest in?

www.spikedfinance.com Find Margin of Safety, which is 1 – Stock’s Current Price/Stocks Intrinsic Value. Look for companies that have 50% margin of safety. Margin of Safety

www.spikedfinance.com YES! Overview: Play it safe! Look at a stock as a business. Understand the business. Don’t try to make quick money. Look at fundamentals. Ignore the noise Consult with your advisor with your ideas Have a game plan (next seminar). Is this how I can make a return higher than 10%

www.spikedfinance.com If you invest $10,000/annum for 25 years with a return of 7% OR 10% Investing $10,000 means you only need to save: $27 a day. Just don’t spend too much money on McDonalds.

www.spikedfinance.com WORLD’S STOCK MARKET = $40 TRILLION

How to Pick Winning Stocks!