Firstly though, I want to try and help you think about what a quality company might look like, in very non-accounting type terms:
- Lots of customers
- Lost of repeat customers
- Expanding operations: More stores, outlets, etc
- It has a brand - you've already heard of it.
- You find that in your circle of friends, many have handed over money to it.
- It's owners get richer and richer.
- Wonderful
- WOW, Woolworths
- CAB, Cabcharge
- REH, Reece
- COH, Cochlear
- ONT, 1300 Smiles
- JBH, JB Hi-F
- Very Good
- RKN, Reckon
- ARP, ARB Corporation
- CCL, Coca Cola Amatil
- CRZ, Carsales.com
- CSL, CSL
- DTL, Data#3
- FSA, FSA Group
- FWD, Fleetwood Corporation
- MMS, McMillan Shakespeare
- ORL, Oroton Group
- SEK, Seek Ltd
- TRS, The Reject Shop
- BKL, Blackmores
So, my simple investing strategy is just to divide your portfolio equally across all those quality companies.
And that's only half the story. Remember that the investing strategy is to buy quality companies when they're cheap. So, what's a simple way to to determine if they're cheap? Unfortunately, I can't think of a non-accounting way to determine cheapness, but there is an easy way nonetheless. Just look for single digit P/Es in any of the companies listed above only. Single digit P/Es in most of the companies will indicate poor growth prospects rather than cheapness.
So, there you go - a simple investing strategy - quality companies when they're cheap.
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I can see where you are coming from with that theory but with my experience of studying the Australian Industrial market, better to set a buying system which works and watch shares fall down into it, than get a list of shares and wait for them to tumble.
ReplyDeleteThere have always been good shares falling down into good value parameters except at the top of the most outrageous bull markets.
Recent ones since August have been MYR, SHV and SWM all are well known blue chips that had PE in single digits recently and a Dividend yield of greater than 10%.
These shares are far more exciting than anything on the list above.
Hi (Eddie?),
ReplyDeleteThere are many variations of the games that you can play on the stock market. I'm still trying to find the "best", which tends me towards extreme positions - ie, Great (not good) companies when they are cheap (not fair price).
I don't follow SHV & SHM, but on first glance they do look like good companies that are cheap. Both also look to have recently required capital either through debt or equity, which would be a concern to me.
With regards to MYR, I wouldn't buy into a company that seems to be in such a decline. Check out the number of customers in JBH vs MYR. I'd be willing to bet that JBH will have more growth over the next 10 years.
Cheers.
The thing I do like about Myer and fashion related shares in general is that the history is one of being public during the bad times followed by a generous takeover bid that makes them privately held through the good times.
ReplyDeleteI don't actually own any Myer at present as I am in the process of getting together a million of another share that is in my formula and which has no debt but MYR were very tempting over the past couple of months.
I have bought previous incarnations of ColesMyer for one dollar about the same time that Amatil was good buying at two dollars per share.
Any share that makes it to my sharebuying formula is quality and cheap as far as I am concerned.
Shares that don't make it to my formula are the overpriced rubbish whether described as bluechip or any other euphormism for junk.