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 thestreet.com 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 http://seekingalpha.com/article/91789-coke-vs-pepsi-cramer-s-mad-money-8-19-08 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.
Showing posts with label book review. Show all posts
Showing posts with label book review. Show all posts
Sunday, September 7, 2008
Saturday, August 23, 2008
Your money or your life
Recently glanced through this book, especially the section covering the crossover point which signifies "financial independence" after mymoneyblog wrote up an article on this. This point dictates the start of financial independence when your passive income (income generated not by working at a job or business) exceeds your expenses.
The author describes the crossover point by means of this simple figure.
Figure courtesy of the book : "Your Money or Your Life" and mymoneyblog.com.
The author uses the treasury note rate of return to calculate annual return of investment.
Consider the savings invested 60% in one year CDs and 40% in stocks will earn an interest/rate of return of around 4% and 6%(typically stocks should return more) to give an average of 5 % rate of return.
$100k will earn $5k per year or $416 per month before taxes. In reality it will take a long time before which the monthly investment come will touch the line of tip over of financial independence which is the expense line.
However I see that a few milestones could be derived from this discussion. Complete financial independence is the ultimate goal but there could be minor goals on the way. One common example is grocery or eat out bills. This I call as food independence as seen in this example.
There could be other milestones built on the same fundamental idea.
Essentially an individual would like to track the performance of passive investment making some intermediate goals along the path to the final goal.
The crossover in my mind is not a single point but a range. I will discuss that in a separate post.
The author describes the crossover point by means of this simple figure.
Figure courtesy of the book : "Your Money or Your Life" and mymoneyblog.com.
The author uses the treasury note rate of return to calculate annual return of investment.
Consider the savings invested 60% in one year CDs and 40% in stocks will earn an interest/rate of return of around 4% and 6%(typically stocks should return more) to give an average of 5 % rate of return.
$100k will earn $5k per year or $416 per month before taxes. In reality it will take a long time before which the monthly investment come will touch the line of tip over of financial independence which is the expense line.
However I see that a few milestones could be derived from this discussion. Complete financial independence is the ultimate goal but there could be minor goals on the way. One common example is grocery or eat out bills. This I call as food independence as seen in this example.
There could be other milestones built on the same fundamental idea.
Essentially an individual would like to track the performance of passive investment making some intermediate goals along the path to the final goal.
The crossover in my mind is not a single point but a range. I will discuss that in a separate post.
Friday, July 4, 2008
The World is Flat - review
Recently I have been reading the book "World Is Flat" by Thomas Friedman. One good thing about the book has been it has brought alive a lot of interesting historical events which were stored in our grey matter somewhere. Since there are so many facts brought about in the book its hard to recollect all .. a blog to share might we worthwhile
I had some interesting take aways in the few chapters I read in the book.
Take the story of how Walmart grew and does business with its "Everyday low prices". One thing that Friedman points out intelligently in one of the chapters is how the society pays for the above in an indirect way. He takes an example of how Walmart insures its employees and makes a point in saying that the society indeed pays for the "everyday low prices" through tax money whereas Costco does do the opposite but thats what a citizen in many may demand.
Very interestingly Friedman has made some points alive like "income levels of people who shop at Walmart, Target or Costco"? Why is it that some people pay more to get the same thing at other place - is it because of convinience or simply a matter of principle?
More of the World is Flat to continue in my next writings....
I had some interesting take aways in the few chapters I read in the book.
Take the story of how Walmart grew and does business with its "Everyday low prices". One thing that Friedman points out intelligently in one of the chapters is how the society pays for the above in an indirect way. He takes an example of how Walmart insures its employees and makes a point in saying that the society indeed pays for the "everyday low prices" through tax money whereas Costco does do the opposite but thats what a citizen in many may demand.
Very interestingly Friedman has made some points alive like "income levels of people who shop at Walmart, Target or Costco"? Why is it that some people pay more to get the same thing at other place - is it because of convinience or simply a matter of principle?
More of the World is Flat to continue in my next writings....
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