Compounding Quality

Stock selection framework Use this framework to find great stocks 1️⃣Universe of ideas These are your general investment ideas. Keep your eyes and ears open. Good ideas can come from anywhere. Use these screening criteria: - Sales & Profit growth > 10% - Debt / Equity < 1x - Return On Equity > 20% - P/E < 25x 2️⃣Circle of competence Is the business simple? Do I understand how the company makes money? Criteria: - Know your limits and stay within them - The size of your circle does not matter, knowing your boundaries does 3️⃣Financial stability filter How has the company grown in the past? How clean is the balance sheet? Does the company have a positive cash flow? Criteria: - Look for stability and consistency - Cash flow is more important than earnings 4️⃣Wide moat filter Is the company better than its competitors? Only invest in companies with a sustainable competitive advantage Criteria: - High and sustainable gross margin (> 40%) - High and sustainable ROIC (> 15%) 5️⃣Price filter Is the valuation of the company reasonable? The larger your margin of safety, the better. Criteria: - Buy wonderful companies at a fair price - Focus on the intrinsic value per share growth This beautiful visual was made by Vishal Khandelwal. __ 📚 You want to learn more about investing? You can find my 10 favorite stocks for 2024 here: https://lnkd.in/ehJTm_3V

10 Crucial Investing Ratios 1️⃣ Gross margin (GM) 🎯 What? The company's gross profit compared to its revenue 💡 Formula? Sales - COGS / Sales 2️⃣ EBIT Margin 🎯What? What percentage of sales remains as profit before tax and interest 💡 Formula? EBIT / Sales 3️⃣ Debt-to-Assets 🎯What? The total amount of debt a company has relative to its assets 💡 Formula? Debt / Assets 4️⃣ Debt-to-Equity 🎯What? Ratio used to calculate a company's financial leverage 💡Formula? Debt / Equity 5️⃣ CAPEX/Sales 🎯What? Measures the capital intensity of a company 💡 Formula? Capital Expenditures / Sales 6️⃣ Return On Equity (ROE) 🎯What? Indicates how profitable a company is in relation to its equity 💡 Formula? Net Income / Equity 7️⃣ Return On Invested Capital (ROIC) 🎯What? Shows you how efficiently a company is allocating capital 💡 Formula? NOPAT / Total Inv. Capital 8️⃣ Earnings Per Share (EPS) 🎯What? How much money a company makes for each share outstanding 💡 Formula? Net Income / Shares Outstanding 9️⃣ Free Cash Flow Realization 🎯What? Measures how much earnings are translated into free cash flow 💡 Formula? Free Cash Flow / Net Income 🔟 Price-to-Earnings Ratio (P/E) 🎯What? Ratio that compares a company's share price to its earnings per share 💡Formula? Price Per Share / Earnings Per Share Which ratio would you add? 📚 Grab my free Financial Analysis course here: https://lnkd.in/eJtj3pFa

Financial Analysis A comprehensive guide 1. Introduction 2. Types of Ratios 3. Ratio Analysis 4. Juhayna Co. 5. Juhayna Consolidated Income Statement 6. Juhayna Consolidated Balance Sheet 7. Horizontal Analysis of Juhayna Co. 8. Vertical Analysis of Juhayna Co. 9. Ratio Analysis of Juhayna Co. 10. Domty Co. 11. Domty Consolidated Income Statement 12. Domty Consolidated Balance Sheet 13. Horizontal Analysis of Domty Co. 14. Vertical Analysis of Domty Co. 15. Ratio Analysis of Domty Co. 16. Juhayna to Domty Comparison 17. Final Conclusion Source: Elsaid Abulezz 📚 Grab the document in high resolution here: https://lnkd.in/e5Hgb3Bp

The power of books - J.K. Rowling became a billionaire writing books - Jeff Bezos became a billionaire selling books - Warren Buffett became a billionaire reading books Here are my 20 favorite investment books: • Stocks for the Long Run by Jeremy Siegel • The Most Important Thing by Howard Marks • The Intelligent Investor by Benjamin Graham • One Up On Wall Street by Peter Lynch • The Outsiders by William Thorndike • The Boglehead’s Guide to Investing by Mel Lindauer • The Alchemy of Finance by George Soros • Margin of Safety by Seth Klarman • The Little Book of Value Investing by Christopher Browne • Common Stocks and Uncommon Profits by Philip Fisher • The Dhando Investor by Mohnish Pabrai • Mastering the Cycle by Howard Marks • Too Big to Fail by Andrew Ross Sorkin • The Investment Checklist by Michael Shearn • Deep Value by Tobias Carlisle • You Can Be a Stock Market Genius by Joel Greenblatt • A Random Walk Down Wall Street by Burton Malkiel • The Joys of Compounding by Gautam Baid • Where Are the Customers' Yachts? by Fred Schwed

Books can change your life Here are 9 book summaries you should know • Atomic Habits by James Clear • The Psychology of Money by Morgan Housel • One Up On Wall Street by Peter Lynch • Thinking Fast and Slow by Daniel Kahneman • Tiny Habits by BJ Fogg • The Most Important Thing by Howard Marks • The Essays Of Warren Buffett by Lawrence Cunningham • Influence by Robert Cialdini • Think Twice by Michael Mauboussin 📚If you enjoyed this piece, please hit the “Like” button. Thank you for your support! Source visuals: TKSuited __ 💡Download these book visuals in high resolution here: https://lnkd.in/eeRePa6H

Free Cash Flow A PDF teaching you everything you need to know 1️⃣ What is free cash flow? The free cash flow of a company is equal to all the cash that enters a company minus all the cash that leaves a company over a certain period. You can calculate it as follows: Free cash flow = operating cash flow - CAPEX The operating cash flow measures the amount of cash that is generated by a company’s normal business operations. The capital expenditures (CAPEX) shows how much money a company has used to maintain or buy physical assets. 2️⃣ What can a company do with its FCF? The company can do different things with its free cash flow: ▪️ Reinvest for organic growth ▪️ Pay down debt ▪️ Acquisitions and takeovers (M&A) ▪️ Paying out dividends ▪️ Buying back shares 3️⃣ FCF Margin This metric indicates how much cash a company is generating per dollar in sales. FCF margin = (free cash flow / sales) Visa for example has a free cash flow margin of 60.2%. This means that for every $100 in sales, Visa generates $60.2 in pure cash. 4️⃣ FCF > Net Income Earnings are an opinion, cash is a fact. While earnings are an accounting metric, free cash flow looks at the money that actually entered and left the firm over a certain period. 5️⃣ FCF Conversion The more earnings are translated into. FCF, the better. FCF Conversion = (free cash flow / net earnings) Seek for companies with a FCF conversion of at least 85%. 6️⃣ Free cash flow yield The free cash flow yield (FCF Yield) of a company is a great way to look at the valuation of a company. Free cash flow yield = (Free cash flow per share/ stock price) The higher this ratio, the cheaper the stock. __ 📚 Grab this PDF in high resolution here: https://lnkd.in/eTBP3W4b

Mastering time management The ultimate cheat sheet to increase your productivity A fantastic visual made by Victoria Repa 1️⃣ Eat that frog Do the most important & difficult tasks first thing in the morning. Works well for people who struggle with procrastination. 2️⃣ Pomodoro 25 minutes of wor, 5-minute break, and then a longer break. Works well for people who struggle with distractions. 3️⃣ 2-minute rule If a task can be completed in 2 minutes or less, do it right away. Works for boosting productivity and reducing procrastination. Credits: Victoria Repa ____ 💡 Did you like this? Receive my free Investing E-book here: https://lnkd.in/ebvU2Exh

120 Years of stock market history in one chart Here are 15 things I learned from 120 years of stock market history: Lesson 1: Invest for the long term. In the short run, stock returns can be very volatile, but they are very robust in the long run. Lesson 2: On average, you double your money in the stock market every 10 years. Lesson 3: In the long run, stocks are less risky than bonds. For 20-year holding periods, stock returns have never fallen below inflation. Lesson 4: Don’t try to time the market. Time in the market is way more important than timing the market. Lesson 5: Our world continuously changes. Avoid companies who are highly exposed to rapid changing industry dynamics. Lesson 6: This time it’s not different. History doesn't repeat itself. But it often rhymes. Lesson 7: Let your winners run. Selling your winners and holding your losers is like cutting the flowers and watering the weeds. Lesson 8: Low stock prices are great for investors. Lesson 9: Invest in companies that translate most earnings into free cash flow. Earnings are an opinion, cash is a fact. Lesson 10: In the long term stock prices always follow earnings growth. Lesson 11: Look at the equity premium. Over the past 200 years, the equity premium (the spread between the return of stocks and return of government bonds) has averaged between 3% and 3.5%. Lesson 12: In general, small cap stocks outperform. Smaller stocks generate a higher return on the stock market. Between 1926 and 2006, the smallest decile stocks compounded at a CAGR of 14.0% compared to 10.3% for the S&P500. Lesson 13: Cheaper stocks outperform the market. Based on the price-earnings ratio, the 20% cheapest stocks outperformed the S&P500 by 3.2% between 1957 and 2006. Lesson 14: Do not invest in IPOs. From 1968 through 2000, a buy-and-hold strategy on IPOs underperformed the index in 29 out of 33 years that were studied. Lesson 15: The stock market is a leading indicator for the economy. On average, the lead time between what happens on the stock market and what happens in our economy is equal to 6 months. _ Did you like this? Grab this PDF with 50 investing visuals here: https://lnkd.in/epJNgDvz

Free Cash Flow A PDF teaching you everything you need to know 1️⃣ What is free cash flow? The free cash flow of a company is equal to all the cash that enters a company minus all the cash that leaves a company over a certain period. You can calculate it as follows: Free cash flow = operating cash flow - CAPEX The operating cash flow measures the amount of cash that is generated by a company’s normal business operations. The capital expenditures (CAPEX) shows how much money a company has used to maintain or buy physical assets. 2️⃣ What can a company do with its FCF? The company can do different things with its free cash flow: ▪️ Reinvest for organic growth ▪️ Pay down debt ▪️ Acquisitions and takeovers (M&A) ▪️ Paying out dividends ▪️ Buying back shares 3️⃣ FCF Margin This metric indicates how much cash a company is generating per dollar in sales. FCF margin = (free cash flow / sales) Visa for example has a free cash flow margin of 60.2%. This means that for every $100 in sales, Visa generates $60.2 in pure cash. 4️⃣ FCF > Net Income Earnings are an opinion, cash is a fact. While earnings are an accounting metric, free cash flow looks at the money that actually entered and left the firm over a certain period. 5️⃣ FCF Conversion The more earnings are translated into. FCF, the better. FCF Conversion = (free cash flow / net earnings) Seek for companies with a FCF conversion of at least 85%. 6️⃣ Free cash flow yield The free cash flow yield (FCF Yield) of a company is a great way to look at the valuation of a company. Free cash flow yield = (Free cash flow per share/ stock price) The higher this ratio, the cheaper the stock. __ 📚 Grab this PDF in high resolution here: https://lnkd.in/eTBP3W4b

Applied Corporate Finance A masterwork by Aswath Damodaran Here's what you'll learn: - Foundations of Corporate Finance: - Investment Decisions - Financing Decisions - Dividend Decisions - Valuation - Risk Management - Corporate Governance - Behavioral Finance - Global Perspective - Case Studies 📚 Grab the full PDF of 1,000 pages for free here: https://lnkd.in/d3TrsAdY Yo