| Guidelines for Stock
Analysis
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| 1. Long term EPS growth rate of 10% minimum | |
| 2. A Payout ratio of less than 50% | |
| 3. A return on equity of at least 15% | |
| 4. Sales of at least $1 billion per year | |
| 5. Total Debt should be less than 2 times total book value | |
| 6. Must have traded for at least 20 years | |
| 7. RealPE < .66 | |
| 8. The Formula buy price < actual price | |
| 9. Passes
14/15 Fisher Points
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| BUY
Signals / HOLD Signals / SELL Signals For Quantitative Side (Michaelis SIDE)
THIS SECTION HAS BEEN SUPERCEDED PLEASE CHECK OUT OUR SECOND STAGE ANALYSIS. BUT DON'T FORGET FISHER'S 15 POINTS BELOW!
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| For Non-Financials:
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| 1. BUY is achieved when both
PR/MTR and Real PE are in agreement in the following manner: PR/MTR must be less than .85 Real PE must be less then 1.00
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| 2. A Sell Signal is achieved when
both are in agreement: PR/MTR must be greater than 1.00 Real PE must be greater than 2.0
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| For Financial Stocks
(Banks, Insurers etc…..):
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| 1. A buy signal is given when: PR/MTR is less than 1.70 REAL PE is less than 2.00
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| 2. A sell signal is given when: PR/MTR is greater than 2.00 Real PE is greater than 4.00
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| **** Important point**** Both must be in agreement for a decision on the quantitative side to be made.
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| QUALITATIVE
SIDE (FISHERS “15 POINTS”) FOR A STOCK TO BE RANKED A BUY IT MUST PASS 14/15 POINTS FOR A STOCK TO BE CONSIDERED A SELL IT MUST FAIL 7 OUT OF THE 15 POINTS BUY = 14/15 = 93% = A SELL = 8/15 =53% = F
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| Here
are Fishers “15 points” which can be found on pages 19-50 of Philip A. Fisher's
Book “Commons Stocks and Uncommon Profits”:
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| Point 1
= Does the company have products or services with sufficient market potential to make a
sizeable increase in sales for at least several years?
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| Point 2
= Does the management have a determination to continue to develop products or processes
that will still further increase total sales potentials when currently attractive product
lines have largely been exploited?
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| Point 3
= How effective are the company's research and development efforts in relation to its
size?
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| Point 4
= Does the company have an above average sales organization?
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| Point 5
= Does the company have worthwhile profit margins?
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| Point 6
= What is the company doing to maintain or improve profit margins?
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| Point 7
= Does the company have outstanding labor and personnel relations?
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| Point 8
= Does the company have outstanding executive relations?
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| Point 9
= Does the company have depth to its management?
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| Point 10
= How good are the company's cost analysis and accounting controls?
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| Point 11
= Are there aspects of the business, somewhat peculiar to the Industry involved, which
will give the investor important clues as to how outstanding the company may be in
relation to its competition?
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| Point 12
= Does the company have a short range or long range outlook in regards to profits?
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| Point 13
= In the foreseeable future will the growth of the company require sufficient equity
financing so that the larger number of shares then outstanding will largely cancel the
existing shareholders' benefit from this anticipated growth?
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| Point 14
= Does the management talk freely to investors about its affairs when things are going
well but “clam up” when troubles and disappointments occur?
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| Point 15
= Does the company have management of unquestionable integrity?
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| Final Note***** For a company to made a buy or a sell it must pass or fail both Michaelis and Fisher and must be voted on by our study group and achieve a two thirds majority. Also this is a study group involved in theoretical finance and decisions to buy and sell are just theoretical in nature and should not be taken as Financial Advice. All decisions made by those purchasing or selling based on our theoretical study do so on their own responsibility for their own actions. We are a non profit group who are trying to come up with a system to help the small investor. We can not be held responsible for any losses that might have occurred based on our work, for it is purely theoretical in nature. |