Sunday, September 7, 2008

Sane Investing in an Insane World - review

Recently I have been reading this book . Definitely some takes and some "non" takes from the book. Cramer goes over different stocks to be purchased at different times in the economy. Once an industry is picked , next is the choice between various companies within it.
Here are some guidelines that are outlined in the book for comparing stocks in an industry
1. P/E ratio, this seems to be the #1 principle.
2. Growth rate of a company: Online sites like or reuters or yahoo finance will list the rate the company is growing. This should be in sync with the growth rate.
3. Dividend comparison: Yield is the trick, Compare yield vs. the actual dollar amount of the yield.
4. Think outside the box: Real business world. Are there some take over or other orders lurking for the company?

5. How does the company perform vs. S&P 500. A bargain is a company with P/E lesser than the industry but has better sales and earnings faster. For example in the current market non cyclical stocks would normally outperform the other ones in the market.

As an example Coke vs. Pepsi comparison is listed at Seeking Alpha

More useful tips coming up in the upcoming blog(s).

Disclaimer : Author does not hold KO or PEP at the time of writing the blog and is provided as an example.


abra-ka-dabra said...

Great to find that P/E is still considered a parameter worth its money to decide on stock picking.
I recently discussed P/e in detail on my blog under stock fundamentals.
Hope you will find it worth a read and probably correct me if i am wrong:)