are 5 star stocks for you?
TRANSCRIPT
Are 5 Star Stocks For YouShane Leonard, CFA
1. Why do we have a 5 star rating system
2. What are the 5 stars
3. Will they help you pick stocks?
What we’re going to cover
1. Why do we have a 5 star rating system
2. What are the 5 stars
3. Will they help you pick stocks?
What we’re going to cover
• There are over 40,000 stocks in the world
• There are hundreds of metrics
• We need to starting point
• Solution:
- 5 stars
Why do we have a 5 star rating system
• Is the company, behind this stock, a good businesses?
• Is the stock cheap or expensive?
• What do other people think of the stock?
Where is the starting point?
1. Why do we have a 5 star rating system
2. What are the 5 stars
3. Will they help you pick stocks?
Are 5 star stocks for you
• Is it profitable?
• Is it growing?
• Does it pay dividends?
Is it a good business (3 stars)
Is it a good business (3 stars)
• Is it profitable?
• Is it growing?
• Does it pay dividends?
Is it profitable?• What is EPS? Earnings Per Share?
$20 profit
10 shares
$2 per shareDivide by Equals
Is it a good business (3 stars)• Is it profitable?
• Is it growing?
• Does it pay dividends?
Growth? Profits (EPS)
Sales
Long Term
Is it growing?
Is it a good business (3 stars)• Is it profitable?
• Is it growing?
• Does it pay dividends?
Does it pay dividends?• What are dividends? Dividends per share?
$20 profit
$2 per shareBecomes
Keep it
Dividends
Is the stock cheap or expensive (1 star)• Let’s look at 2 different stocks, both earning the shareholders
$2 a share
• One share costs $20, the other $10
• The $10 share is cheaper
• You pay half the price to get the same $2 of earnings
Is the stock cheap or expensive (1 star)• The lower the price for the same amount of earnings,
the cheaper the stock
- a price of $10 / $2 of earnings is a 5 times multiple
- and $20 / $2 is a 10x multiple
• This comparison is called the “Price to Earnings” ratio,
PE for short
• We focus on the views of the experts
• Experts on Wall Street, the City of London, and at similar
leading stockbroking firms across the global
• These professionals talk to the CEOs, competitors,
regulators, and then make recommendations to the large
asset management firms
What do other people think (1 star)
• 3 stars for the quality of the business
• 1 star for its price
• 1 star for the expert view
What are 5 star stocks
• 3 stars for the quality of the business
• 1 star for its price
• 1 star for the expert view
What are 5 star stocks
1. Why do we have a 5 star rating system
2. What are the 5 stars
3. Will they help you pick stocks?
Are 5 star stocks for you
• Quite simply, yes
• But 5 stars are a starting point
• Not a reason to buy a stock
Will they help you pick stocks?
Are 5 Star Stocks For YouShane Leonard, CFA