Financial Freedom SG

It is like going to the supermarket and asking what to stock up on.

You end up buying things you don’t need at a higher price than if you have done some basic homework to find out what are the prices of some of the items like.

The same applies for the stock market if not more so.

It is a lot more expensive to buy something in the stock market for one.

Also, it is amazing how people can scrimp and try to save a few cents on purchase in the supermarket and haggle over prices but when it comes to the stock market, buy at high prices and then sell at a loss later.

If you are in the stock market for long enough, you will make mistakes and get lemons among those stocks that you buy. But you want to get more multi baggers (stocks that return multiple times more than your purchase price, like a 200% increase)  than lemons.

So what are good buys?

A checklist/guide of sorts may be useful.

In no order, these are good companies’ characteristics to look out for to add to your portfolio if they have a lot or all of these characteristics.

Companies that

1. sell below their book value because of negative news
2. have a long history of paying good dividends (these are stocks that you can retire with which will pay you money every year)
3. have good cash flow/ cash on hand
4. are price setters (ie they are monopolies and the buyers have to take their prices and still stay with them)
5. have increasing sales/ decreasing costs, ie profitability
6. are not on an acquisition binge and buying companies left, right  and centre, as this will mean murky accounting and costing later
7. are buying their own stocks back
8. are different from the companies you have in your portfolio
9. you can understand what their business is, better yet if you can participate and see, ie going to Suntec to see if their properties are all rented out, and whether there are crowds there before deciding to get the Suntec REIT.
10. have good financial ratios (which you can quickly grasp with a Dummy’s guide or just google it) comparable or better than their competitors in the same field. Good stock websites like POEMS even calculate them for you so that you don’t have to have a degree in Accountancy or CPA to do the math.

So what are you buying and what have you bought?