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5 Things Not to Do When Valuing a Company | Phil Town
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- เผยแพร่เมื่อ 14 ส.ค. 2024
- One of the keys to making money with investing, is properly evaluating a business or stock. Here are 5 things you should AVOID when going deep on a company and diving into their public facing numbers. bit.ly/2Wr3Lk1
To help you translate these complicated numbers, I have a FREE investment calculator for you. Click the link above download
Also, to celebrate my 250k subscribers I have a giveaway going on right now, click here to sign up: bit.ly/250kr1gi...
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investing money, investing in stocks, how to invest in stocks, how to invest your money
As I’ve reached 250 k subscribers on youtube I want to celebrate! Don’t miss the chance to take part of my giveaway where you can win 1,500 in CASH >> th-cam.com/video/BbeU9W5oTN0/w-d-xo.html
Hi Phil, does the prize give away be applicable to people that live outside US.... Including Australia, like me?
@@johjohnson In another one of his videos it says US only.
@@DOJODAR I thought that might be the case after reading the terms and conditions
Hi Phil! Greatly appreciate your guidance. But I am getting really weird results using your technique. I can hardly find any stock worth investing (almost every 'popular' companies except AMZN shows abysmally low valuation). is this normal, or just the current market is grossly over-valued?
SUMMARY
1. Don't buy stocks based on tips from ANYONE. Do your own due diligence and understand the company yourself. Keep up to date with the research as things change all the time.
2. Stick to companies that are CONSISTENTLY growing. Dive deep - Look at ROI capital, Return on equity, Sales Growth, Earnings growth rate, cash growth rate.
3. Check the companies debt on the Balance Sheet. Can they pay off the debt within 3 years or less out of their earnings? (Long term debt ÷ current free cash flow). Be cautious of debt that's rising.
4. Don't buy a company that doesn't have a competitive advantage, i.e. an Economic Moat (that protects the "castle") - a qualitative measurement of its ability to keep competitors at bay for an extended period of time for prolonged profits into the future. Eg. Cost advantage, size advantage, and intangibles such as patents, brand recognition, government licenses.
5. Don't pay retail prices. Buy stocks when they're on sale for a Margin of Safety.
Y'all welcome!
Oh thank you!
Thanks
Thank you. Btw iam new in investing. I want to ask about point no 3. Which one should we take into consideration, short term debt or long term debt? Thanks
Nyx Nerubian
Both are important but here he talks about the ability to pay back long term debt without taking on debt to do that. You should also learn about the quick ratio and debt to equity ratio: www.investopedia.com/terms/q/quickratio.asp
Cheers and good luck!
@@Donovaan thank you. 👍
Hey Phil make a video calculating value of a few companies for education entertainment only :) because example is only way to teach like you did about lulu Lemon in your podcast but include financial statements and finding trustworthiness of management
PS: hit like button so Phil can see this ..
Phil please say if you will make this video or not :)
Thanks Phil. One of the most valuable videos you have published IMO. Cheers from Singapore.
I think the enemy of the margin of safety is FOMO, with people buying because they think something is going to do well because it is getting a lot of attention in the press or in financial circles (or tips from the brother-in-law). They buy in regardless of the current price. They don’t want to miss out on a possible upward trend. I think that same reasoning is what goes on for a lot of IPOs. What people are not understanding is that when a company is getting a lot of coverage, they’ve likely already missed the good price buy in point.
I wish I watched this video before listening to a friend’s recommendation, bought a stock and lost 10 grand. It was a small capital very volatile company. It was an expensive lesson.
Yes. And i lost 5 bucks when i sold my 1 share after i learned more about investing and did my due dillegence. Turns out i bought it at 30% above fair value, the opposite of what i need to do.
I would be down 15 bucks today. It wasnt a costly mistake to make, but an important one.
Yeah When I was starting out in investing when I was still a noob I invested in a company called "MBL infra" by the recommendation of an expert on TV. He was saying enthusiastically how great this company is, that this is going to be a jackpot blah blah... I lost 25% of my money in a couple of months gladly I sold it and it went down further and is now a penny stock.
Never listen to any tips! They are mostly wrong. Don't even listen if they are right. Do your own research
Phil I am from India and your advice is priceless!!!
No body care where u from
@@ibrahimalgosair8667 😂
Which Indian website do you use to get the big five numbers
And how is your experience till now with this technique
Phil Town is a bad ass- and a smart guy when it comes to stocks. he's an even better speaker in person- lots of charisma.
Hey Phil , thanks for the two videos
5 don'ts in valuation
And 2019 value investing books
I asked you to talk about it and you made a video . That's really helpful .
*Can you please make a video about finding the intrinsic value of a company?*
How to make sure you get a good value.
1. Buy value companies during a pandemic.
2. Great 5-10 year trend up until day the market crashes.
3. Rich people make money on bad news. It's the good news that's being sold. The bad news is bought.
4. Dont listen to random people on the internet like me. I'm just a random guy.
Hey Phil great video once again. This is really helpful when analyzing a company for a long-term investment. I would love to see a video of you analyzing a company or what to at least look for.
New to finance myself, I'm actually in my Junior year of accounting and decided to try my hand at some investing. One family member took my advice on MTDR at $4.50 a share and sold at $8 a share and rebought in at $7.50. Not to bad, it was only a $500 stake but it was a nice return. I made around $1400 capital gain, but if it was not for fomo, I would have made 3k from MTDR.
Hi Phil, I am learning your rule 1 investing at a pace that works best for me and it has been a great ride in my learning. I started out very cautiously as is my nature but have grown in confidence through your books and videos. I would have never a year ago have seen myself where I am today I am grateful to you for opening my eyes to see a reality that most never do. I am no longer afraid of expecting the most in my life. Regards, Mike
I gotta be honest, when I first started, all I did was take stock picks from my dad and I did amazing. He's got an MBA and worked as a stockbroker for a long time though, lol. I still take his advice, and he takes advice from his friends that are smarter than him... you can't know everything, so just listen to people smarter than you, factor that into your own research, and make the decision for yourself.
What if you get a tip to listen to Phil Town? ;-) Best thing I ever did!!!
I would love to have you do a series on finding the big 4 numbers and the averages. I'm kinda spinning my tires on that during the valuation process!!
I bought in a 50% margin of safety company (Virgin Airlines), but now they are in voluntary administration! I didn't check their financial health before hand, but I still really like this company and their service.
I really find your videos real and honest thanks. Thank you for straight talk.
Yes, I lost money on ZINC.
It wasn't a tip, but somebody I respect saw value in it, so I put the rule aside. Lesson learned.
Right. I advised my friends to invest and learn investment and they want to invest but don't want to learn. They just want to follow but I said, don't. 😊
Great video, but I disagree with the last point, at least somewhat. Certainly one should never overpay for a company, but buying a great company at a fair price is often very lucrative. Far better than getting a mediocre company at a bargain price. The fact is that great companies are rarely available at bargain prices.
My friend recommended Lithium ion companies and then without my research I bought some and then it dropped and so I sold it and bought a watch! That's what happens without research and actually liking the company!
Thanks Phil. I throughly enjoyed this episode like all others. I had very bad experiences and almost lost all of my capital on someone advice. Can you please do an episode on trading rather investing by detailing strategies. Thanks
Got a tip from my brother that AMD was going to go up as they just replaced their ceo, this was around 3 years ago. Took my $1000 tax return and invested in it at $2.65 a share. Little over doubled my money as I was forced to sell.
Yes, Kraft Heinz a year ago. But it was a micro sized position and I sold with 30% loss when divi was cut. But it taught me a lot for very little money.
Valuable lessons and guide for practicals.
I thought after investing for about 6-12 months, that I had it figured out. I actively tried to get friends to invest too (with the best intentions)... I’d recommend a stock to buy that I was sure was a home run. Each time I did it, I was dead wrong and the market turned big. I consider it bad mojo now- I do my best to not make any recommendations now. Luckily for me, most people never took my recommendations anyway. But lesson still learned. So, don’t take recommendations... but also don’t give them either!!
Just getting started and no for stocks, yes for closed end funds and so far, they are working out much better than money in a savings account. Utilities and healthcare funds. I still did my own research.
I tend to use Motley Fool for investment advice. I do my own research too but they have been consistently beating the market so it’s a great starting point.
When I first started investing I followed the advise of my mother and that ended up pretty poorly. She recommended I buy blue chip bank stocks because they pay good dividends so I invested over half of the funds I had into those stocks, but so far I have made a pretty big capital loss on them (about 10%-20% over 2 years). I also used to follow some of Motley Fools recommendations without further research and they all worked out pretty well. I made an average return of about 5% over the course of 6 months which was a decent amount more than the market at that point. Now I always do my own research though.
Im new to this and reading Rule 1 investing. Its confusing in places. Hope it all come together tho. Any tips on how to do thorough calculations and where to find the info?
Thank you Phil for great tips!!!
I'm a fanatic of this style of investing now omg. So good!
This video was extremely helpful have your books and am enjoying reading them new to the game and watching and learning from you all thanks
Big fan, you provide soo much value with your books and videos. Giving back in the right sense. Thank you
How do you define when a company is on sale?
Margin of Safety Evaluations
When the stock price drops by a huge amount DUE to economic downturn, but be careful cause the company might be heading for bankruptcy if theirs no economic downturn
From a technical standpoint it is when you have a pullback that is market driven (not justified by fundamentals)
@@SuperCowboys16 Like this Pandemic?
@@joker709_7 Yes.
Im from chennai, tq for valuable advice
This video is a good simple summary of the book Rule #1 investing. Great for people who hasnt start following uncle Phil and read his and his daughter's book. great video.
Ive currently reading this book. Its very confusing in places. Does it all come together at the end and is it easy to find the results you neef with online calculator?
Cool video. Gonna try using the Long Term Debt / Current Free Cash Flow technique you outlined.
Same, been looking for a method to take debt into consideration other than...hmmm that number seems a little high. I can’t really get a handle on the variations in debt ratio.
I know this really well. I was buying Starbucks at $48 & all new was bad and people taking bad new and I sell all and now is at $78
Is a established supply chain network / economies of scale considered a competitive advantage? It's not one of the five Moats but I think it gives businesses an intangible advantage over competitors.
*One mistake i made was investing in a company just because another well known billionaire investor invested into it,*
notwithstanding my researching indicating that it was a bad investment. I figured they know more/better than me. The stock dropped like 30% a few weeks later and cut its dividend substantially
Sounds like you invested in Kraft Heinz
@@KirkTeebag 😂😂 "praise by name, critize by category"
@@Je.rone_
Haha! Was @Kirk Teegardin said true?
BTW, what is the meaning or the moral behind the quote "praise by name, critize by category"?
@@ExtraordinaryLiving i interpret it as give credit when credit is due to the specific person or entity. But when criticizing someone or some entity sometimes it is kind to speak in general terms in lieu of calling that person and entity out unnecessarily.
@@Je.rone_
Ahhhh, okay, I get it, haha!
I think index investing is good for those with little time or have anxiety/stress and will worry about investments a lot. Or those that struggle to make decisions when to sell or buy more etc. I am doing that on my pension account as I already have two other portfolios to stress about.
But a moat is a bit of a hard one too sometimes - for example buffet did coke and mcdonalds, but it is only subjective whether pepsi or coke is better, or burger king or mcdonalds etc. product wise. Yes, you can't replicate the big mac legally, but then a bacon double cheeseburger with onion rings (rodeo burger) is pretty special too and unique... I guess sometimes even companies with large competitors or many in a sector can still do well without being untouchable or 'unique' in a broad sense. ?
Very useful video..thank you very much..
Yes, perfect time to hold cash right now. Too many people chasing stocks because they dropped 1 or 2 % this week.
Hey Phil, do you have videos on how to compile a business valuation based on financial statements? Or do you plan to make some videos of that sort?
Love you Phil. Thanks for all you do!
Hi, when we devide long term debt over free cash flow, which result is good and which result is bad? Thanks
i almost bought bitcoin when everyone was saying to buy a few months ago. i am glad i didn't...
Good work! I heard people took out loans of all kinds so that they could get into bitcoin! 🙈🙈🙈
The most dangerous thing would be that you could make a lot of money from it and the second time you could invest your everthing and loose all your money inclduing your healthy.
I didn’t interested in bitcoin since the beginning.
Still glad?😄
@@Trimplin1 😂🤣🙏
I invested in the company Iridium and they went up roughly 15% (I was on the tail end of their climb) and now they are stuck lol. I'm down 5% for the past few months.
Yes i did take advice from a friend to invest in company. I lost about $1500. Learned a hard lesson on that one!
#4 is my favorite
There is no way Buffet bought Amazon on sale. Plus Amazon has a very bad percentage return and used to lose money on many occasions.
Buffett didn’t buy Amazon
Remember everyone acts to maximize their own happiness
Awesome stuff Mr town!
Thanks Phil awesome video!!!
more videos on options please
Check this video out, Manas! bit.ly/2JZrSUp
Thank you so much for sharing this useful data! Greatly appreciated.
Hey Phil, where do you park funds that you want to grow but don't want to take too much risk?
Try GSY etf, pays yearly dividends 2.73% (-0.25% expenses) = 2.48% in monthly installments and never fluctuated by more than 1% from its mean in over 10 years. That's right, not even during the 2008 market crash.
Thanks for the tips Phil
when you say to buy a stock on sale, what's the definition of "on sale"?
Dear Phil
Do you have any idea on the new concept: Intrinsic compoundings?
Phil, would it be prudent to look for mostly undervalued companies?
I can’t understand what it meant by ‘choose the right company to invest’. The entire world knows Apple / Google / Facebook / Microsoft / Amazon are among the best companies. Can’t one just buy their stocks, especially when they are low priced and hold for 30 years? Why to hammer brain on reading annual reports / P&L Statements / Balance Sheets etc etc, By the way, is investing not a gambling? All that has to be correct is the prediction and prediction may go wrong too even with Warren Buffet, Recall he exited from IBM admitting he was wrong and he recently did from the top airlines and he was too late to invest in Apple and he lost chance to think about Google.
awesome video!
Thank you...sir
I bought crypto because a co worker said its a good idea... Lets just say it was a really dumb move on my part.
Why not buy it when nobody knows about it?
@@CommandoMaster because maybe there are 1000's of things that no one knows about? You suggest buying them all? Ok.
@@CommandoMaster crypto sucks for me because to this day I dont have a clue how that shit works. Everytime someone tries to explain it my eyes glaze over. I bought in November 17 ... Months before it crashed ... I knew it was a bubble but I thought I could ride it out just a little bit more. So my greed made me dumber. Well its a lesson learned.
Commando Master yup if you gonna buy crypto just buy bitcoin and maybe etherium but do a bit of research
where can you find stocks on sale?
Hi Phil!
Hi, I recently read "Common stocks, uncommon profit" the part where Philip say past number doesnt tell much about future incomes. I think it right, what do you think? Now I'm a little confused about expecting growth rate, can you recommend me some books about this part?
TYSM for the lessons.
Hi Phil, congratulations on reaching 250K Subscribers. Quick question about MOS. I've been a big Google fan, love the company, use their products - I've had them on my watchlist for years. MOS is around $1000 +- for this Stock. Current Price around $1168. I've found this price to be as close to a good deal as I'm going to get given the current news around the Market. What is your take on a Ticker that is not exactly at MOS price but very close? Thank you
Google is a terrible company to buy. Their price hasn't gone up anywhere in years. If you love watching the paint dry, then by all means go buy Google.
@@vitaminb4869 you're probably right, I like the company though, they've been consistent with their earnings , granted it's not a 15-20% annual return but still not bad. I agree with you though, it's not very exciting.
The last time I valued Google using Phil's methods, I came up with a MOS price of around $662. But my windage growth estimate was only around 15%.
@@vitaminb4869 'the prices hasn't gone up anywhere in years' you mean they went from 500 dollar to 1500 dollars in just 5 years... Just look at the revenue and profit growth for sake they are building the future what are you talking about.
@@barskorkmaz8323 At the time I wrote my comment they were around $1200 and really not going anywhere in a few years. Just over doubling in 5 years is not that impressive considering those 5 years were very bullish market wide. They are also the worst of the FAANG stocks + MSFT.
Do you have some sort of school? I’m new to all this but I feel like I can dig deep into this. I mean a school starting from A to Z, literally everything anyone should know about investing, including grade level stuff.
Yes I do. Check out my free course online! Perfect for beginners. bit.ly/30xf24Y
Fantastic advice
Yes.... an uranium company. The rationale had to do with petition 232 and it's only down. Sold it but got burnt.
I would say the first mistakes investors make is buy a stock base on its price.
Thank you 🖤🥀🥀
Margin of safety is important.
Commando Master
When prices are down and the market is trashed, will you step up and buy? If the answer is “yes” then you are on your way to becoming wealthy.
Superb !
useful!
How can I buy a stock / company on sale?
There should be lyrics sir what you speaks simultaneously.
I am from India and I find difficulty in understanding some words.
Hope you understand..
Starts at 1:39 Thank me later
You lul
Learning how to value a business can be difficult. A Teenager’s Guide on how to Invest Like Warren Buffett and Charlie Munger is a good resource for new investors.
got a tip from a friend and it doubled. Just don't take advice from friends without a clue..
He admires mohnish pabrai and here in India hardly anyone knows him
What is the best place to research these companies besides Google? Wall street journal?
Hey Jody! Here’s a helpful exchange that shows how to use their search tools to hone in on potential Rule #1 companies: bit.ly/2Li8pfL
What does it mean? “Don’t pay retail prices.”?
Do not pay the average market price, but try to buy when the price drops (some bad event happens, recession etc).
Nice
recommended stocks really does not work
What do you mean stock at retail do you mean by it when it's on the downside?
retail means full price.
Why not to invest in S & P 500 index fund?
Because there are much better options out there.
Any idea why the stock market is doing extremely bad?
us - china trade
Fear and uncertainty
To high prices are falling when investors are realizing that the prices were not justified by Macro economics trends. And, yes fear of Trump doing one of his gimmicks xD
Extremely bad? SP500 almost at the top...
The hell are you talking about? Market just made an all time high and had nothing but up days for the past 4 months. Which stock market are you following?
""brother-in-law" LOL!
how the hell would I not pay retail price?
Buy at times where there's a temporary dip in a stock, which can be caused by many things like fear of inflation, corona, trade wars and just bad news in general that you know it will recover from.
Wait, what do you mean when the company is on sale?
Hey Keerat! Let’s take a comprehensive look at a proven approach that all of the best investors in the world use to find the best investments: bit.ly/2sH5Uy8
My first ever stock purchase (AMD) was based on a youtubers bullish outlook. I lost 13% in a week, lost more as I dollar cost averaged down...just like the same youtuber suggested. I did very little research and therefore had nothing to stand on while my money dissapeared. I ate the losses. The stock rebounded and did well over the year after I sold.
Learning lessons the expensive way sure isnt fun. Especially when they are basic ones.
Yeah, that's what I've been saying since forever. Don't go on any financial social media. Don't read any articles written by whoever has internet access. All the cheerleaders and doomsday prophets will just cloud your vision.
Love u..🥰
What about when someone has inside info cause he's working as an auditor or is inside top management structure? ;)
lol, then especially ignore it, since you don't want to go to jail for insider trading, hahaha.
Only fools go to jail. Majority of people make their money exactly through insider trading and stock price manipulation.
Have you ever fallen into any of these 5 traps? Analyzing a company’s public facing numbers is not an easy task and for that reason I’ve included a FREE investment calculator for you, in order for you to be able to translate these complicated numbers >> bit.ly/2Wr3Lk1
4:49
Old men investing rule!
You MUST only invest in really solid company on sale!
You may wait years for an opportunity!
No thanks
Look at Tesla, Facebook, google and so on
Have some courage man!
My friends recommended OneCoin cripto currency total fiasco