I am a fundamentals based investor, looking for companies where I believe the market is mis-pricing a share. My approach is very detailed, my mantra is ‘the level of research should be proportional to the length of time it took you to ‘save’ for the capital you are about to employ‘. My trading record in the last year is here using broadly the following approach and it generally works very well for me.
My approach is summarised as below and outlined in more detail below. Under each area you can click to access more posts on each of the topics:
The basic premise is that the more ‘bricks’ on the pyramid you climb the more likely you are to enjoy a good trade. The bricks are as follows:
1.STRATEGY (Click here for blog posts on this topic)
The high level fundamental rules that I operate within. Extreme discipline is needed to stick to them.
2. SCREENING (Click here for blog posts on this topic)
High level screening of stocks that I may be interested in to conduct further research. Typically companies that interest me are ones with Low PE ratios, a track record of continued growth in Earnings Per Share, High dividend yields and other special situations such as new IPO.
3. VALUATION (Click here for blog posts on this topic – Coming Soon)
I take the stocks I have screened and employ both qualitative and quantitive methods to prepare a detailed research note, an example of which is here. This includes developing a BUY and a SELL target price.
4. POSITIONING (Click here for blog posts on this topic)
Looking at basic charting techniques, momentum trades and Level 2 order book to determine the best point of entry. My method is based on the fundamentals of the business but it may be possible to squeeze out an extra few % by understanding how to optimise your trade.
5. RISK MANAGEMENT (Click here for blog posts on this topic)
Protecting your capital. Methods to derisk trades and ensure a balanced portfolio.
I hope you find the outline of my approach useful and please click the individual links to learn further techniques in each area.