Geoff Gannon October 4, 2010

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:

  1. Market capitalization under $100 million
  2. Low float
  3. Foreign – especially from a small country
  4. Not listed in home country
  5. Controlling shareholder (maybe owns 30% – 70%) runs company
  6. Long history of free cash flow
  7. Share buybacks that reduce the share count – especially if done every year
  8. A Dutch auction to buy back a lot of stock at once
  9. Delisted
  10. Just spun-off
  11. Huge, one-time problem (think American Express Salad Oil scandal)
  12. Bankruptcy in past caused by legal trouble
  13. Hostile takeover attempt by someone who owns good chunk of company’s shares
  14. Mismatch between reported earnings and free cash flow – FCF is much higher
  15. Accounting quirk – amortization, carrying at cost, owns part of another public company
  16. Selling for less than cash and investments
  17. Selling for less than net current asset value
  18. No analyst coverage
  19. Niche business
  20. Lack of price competition – or the price leader
  21. One of a kind business
  22. Wrong time in cycle to buy this kind of stock: advertising, credit, homes, autos
  23. Goodwill write-downs and restructurings cause reported losses when making money
  24. “Too much uncertainty”
  25. Nowhere near a 52-week high
  26. Stock once traded at several times today’s price

Talk to Geoff about Where He Gets His Investing Ideas