Beginners Primer

THE PEANUT PRIMER

by Chuck54

Sir Head Peanut's Guide to Submitting Stocks for Analysis
AKA--AMA Preliminaries for Dummies (like me!)
AKA--AMA Step by Step Help for the Math and Statistical impaired
(definitely me!)

First, congratulations! Just by making it this far means you're now an official member of the AMA Peanut Gallery! Here's your bag of peanuts and a Coke. Relax and enjoy.

Step 1

You gotta find a stock. Click on the “Quotes/Data” tab towards the top of the AMA page. It's between “Messages” and “My Portfolio”.

At this page if you know the stock ticker symbol you want, enter it in the box to the right of the words “Company Information On…”. It's towards the top of the page. Make sure you backspace over “enter symbol(s)” first. Click “go!” If you don't know the ticker symbol, enter the company's name in the “Lookup” section. If you only know part of the company's name go ahead and enter that. For example, let's use “cola”. When you find the company you want, in this case Coca-Cola; click on the ticker symbol “KO”. You should now be at the “simple” section of the “Quotes/Data” page.

Step 2

Click on the “Estimates” tab and the first item under “COCA COLA CO” will be “Estimated Long-Term Annual Growth:14.58” that's the number we want. Write it down for #1 - “Long Term Growth Rate”.

Step 3

Click on the “Financials” tab and you should see the SEC Filings for KO. In the “Revenue” section find the last complete year listed in the “Total” line. In this case it's 1998, “18.813 billion”. Write that down for #4. I know it's out of order but you'll be OK.

Step 4

Click on the “Snapshot” tab and you'll get a lot more information. DON'T PANIC! You don't need to know all this stuff yet, I sure don't! All right now, take a deep breath, have a sip of Coke, eat a few peanuts, go for a little walk if you need to. OK now? Feeling better? Let's go! Scroll down to “Dividend Information”. Here you'll find “Payout Ratio (TTM)%”. Our number is “*41.99”. Write that down for #2. You're doing great!

Step 5

Find the “Mgmt Effectiveness” section. Here you'll find “Return on Equity (TTM)”. Our number is “*45.89”. Write that down for #3.

Step 6

Find the “Financial Strength” section. Here you'll find “Total Debt/Equity (MRQ)”. Our number is “*0.59”. Write that down for #5.

Step 7

Find the “Valuation Ratios” section. Here you'll find “Price/Earnings (TTM)”. Our number is “*45.14”. Write that down to use in our Real PE calculation.

Step 8

Calculate the Real PE by dividing #7, the P/E, “*45.14” by #3, the ROE, “*45.89. Or, 45.14 / 45.89. You should get .98365657. .98 is fine. Note: If your company is a financial company, like AIG, double the ROE before dividing it into the PE, or, PE/(ROEx2). For example, if KO was a financial co. (which it's not) it's RealPE would be 45.14 divided by (45.89 x 2), or, 45.14/91.78 = .49. If your company is a mixture of financial and other stuff, like GE, multiply by 1.5, or PE/(ROEx1.5).

Step 9
Compare your information to our AMA standards for submission. (See Last thing below).
Results for KO
	1) We need a minimum long term growth rate of 10%. We've got 14.58%. Good, keep going!
	2) We need a payout ratio of less than 50%. We've got 41.99%. Good, keep going!
	3) We need a return on equity of at least 15%. We've got 45.89%. Very good, keep going!
	4) We need sales of at least $1 billion per year. We've got 18.813 billion. Great, keep going!
	5) We need total debt to be less than 2 times total book value. We've got 0.59. Now 0.59 is a ratio that needs to be under 2 (don't ask me I'm just a PEanut Head). 0.59 < 2. Good, keep going!
	6) We need at least a twenty year history. On the "snapshot" page below "Officers" you'll see that KO was incorporated in 1919. We've got 80+ years. Great, keep going! (If your company's incorporation date isn't here then you may need to call their shareholders information number, or go to your company's website for the date. Or follow Disney Dan's info sheet. Thanks Disney Dan!)
	7) We need a RealPE < .66. We've got .98. Ooops KO doesn't qualify right now. Sorry! --NOTE: This number may be lowered if we find enough acceptable stocks. It would apprear the Buffett makes his purchases when the RealPE is at or below .66.
Last Thing
	Check the latest criteria and candidates list. Look to see if your stock is on the list. If not, follow the rest of the directions from there and you should be good to go! Note that the criteria may have changed a little since this was written, sorry! But if you've gone this far then the good folks at AMA will probably help you from here.
	* Note that the numbers used here were obtained on 3/7/99. Your numbers will be different when you do KO, hopefully BETTER! Good luck to you in all your investing! I hope this helped you. Chuck Sir Head PEanut Thanks to Le Patriarche, Pam, rlds70, RodO, DisneyDan, applg8, Mycroft, and of course The PEanut Gallery!