Investing Ideas: 26 Things Geoff Looks for in a Stock
A reader sent me this email:
Hey Geoff
Just curious, where do you get your investing ideas?
Blogs are the best source. Screens are good too. Certain things catch my eye.
Here’s what I look for in a stock:
- Market capitalization under $100 million
- Low float
- Foreign – especially from a small country
- Not listed in home country
- Controlling shareholder (maybe owns 30% – 70%) runs company
- Long history of free cash flow
- Share buybacks that reduce the share count – especially if done every year
- A Dutch auction to buy back a lot of stock at once
- Delisted
- Just spun-off
- Huge, one-time problem (think American Express Salad Oil scandal)
- Bankruptcy in past caused by legal trouble
- Hostile takeover attempt by someone who owns good chunk of company’s shares
- Mismatch between reported earnings and free cash flow – FCF is much higher
- Accounting quirk – amortization, carrying at cost, owns part of another public company
- Selling for less than cash and investments
- Selling for less than net current asset value
- No analyst coverage
- Niche business
- Lack of price competition – or the price leader
- One of a kind business
- Wrong time in cycle to buy this kind of stock: advertising, credit, homes, autos
- Goodwill write-downs and restructurings cause reported losses when making money
- “Too much uncertainty”
- Nowhere near a 52-week high
- Stock once traded at several times today’s price
Talk to Geoff about Where He Gets His Investing Ideas
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