# How would you find an equity?



## kac147 (Jan 12, 2018)

What methods do you guys used to find what companies to buy?

I have set up a standard way from my investing strategy. Since I'm using BMO Investorline, I use its Stock Screener to filter out the ROE, EPS Growth, Quick Ratio and Debt Ratio requirements. 

Then I go through the financial statements for the screened companies. I plug in all the numbers into my analysis spreadsheet and check out the acceptable prices from growth and value analysis.

I think this is a pretty efficient way for fundamental investor.


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## fatcat (Nov 11, 2009)

are you sorting by numbers first or sorting the numbers on companies that you like ?


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## james4beach (Nov 15, 2012)

I like starting from a list of known-to-be-pretty-good stocks, like the TSX 60, TSX Composite, S&P 500. These indexes have some basic criteria for inclusion and have already been screened to some degree.

The TSX 60 in particular is a nice list of large caps and is small enough that you can research the names in there. Just go to the iShares web site and look at the XIU holdings to see what's in there.

Going forward, I also suggest benchmarking your activities. A critical question when you're picking stocks and forming your own portfolio is: am I really doing better than the index? For example, I have a lowdiv portfolio and think that my stock picks are good, but I won't really know until I have a few years of data and can compare to benchmarks. If it turns out that I can't beat XIU or XIC, then the sensible thing is to abandon my approach and just use the TSX index.


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## Rusty O'Toole (Feb 1, 2012)

I look at the Investors Business Daily Top 50 and try to pick good stocks that are going up. If they stop going up and go down, I sell them. Since adopting this Forrest Gump like method I have made money for the first time.


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## Jimmy (May 19, 2017)

Check out Moneysense top picks for 2008 or the Globe's John Heinzl (dividend) and Norm Rothery (value) in the 'Strategy lab' and other sites and compare against your picks. They have done much of the homework already too.


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## Ponderling (Mar 1, 2013)

Exactly my approach too! Moneysense annual by rothery , and occasional hops onto ndir too.


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## kac147 (Jan 12, 2018)

I usually sort by the numbers first. I don't set a preference at first because I don't wanna miss any good companies that meet my requirement but I don't know of. 

If I have some companies that I like, I will just go through their financial statements and my spreadsheet tells me if they are good or not.


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## DavidW (May 27, 2016)

kac147 said:


> What methods do you guys used to find what companies to buy?
> 
> I have set up a standard way from my investing strategy. Since I'm using BMO Investorline, I use its Stock Screener to filter out the ROE, EPS Growth, Quick Ratio and Debt Ratio requirements.
> 
> ...





james4beach said:


> I like starting from a list of known-to-be-pretty-good stocks, like the TSX 60, TSX Composite, S&P 500. These indexes have some basic criteria for inclusion and have already been screened to some degree.
> 
> The TSX 60 in particular is a nice list of large caps and is small enough that you can research the names in there. Just go to the iShares web site and look at the XIU holdings to see what's in there.
> 
> Going forward, I also suggest benchmarking your activities. A critical question when you're picking stocks and forming your own portfolio is: am I really doing better than the index? For example, I have a lowdiv portfolio and think that my stock picks are good, but I won't really know until I have a few years of data and can compare to benchmarks. If it turns out that I can't beat XIU or XIC, then the sensible thing is to abandon my approach and just use the TSX index.


Depends on what my plan is which has changed over the years. When I first started I was trying to find small cap stocks that I thought had a good story and that people were going to pile into, then after the Halloween massacre I moved into income trusts, the last few years I have been trying to increase the strength of the portfolio with companies that can grow their dividends. I compare performance against my current plan which is my basic household budget. Nothing wrong with comparing to an index or using year over year value though.

When I first started with the mining stocks I used websites like Stockhouse for commentary, Stockwatch for news and search, and then SEDAR and company websites for research. I do use lists of index components, dividend aristocrats, as well as knowledge of previously studied companies as a starting point for a new selection. Generally I select the stock that helps and fits my plan and seems to present a good value while having an indefinite holding period as a consideration.

More and more I find myself moving toward trying to form a picture of what management is doing, how the market is treating the stock, and the story the financial statements are trying to tell. One time charges by management and accounting practice changes can have a significant impact and exclude companies when using only a few standard ratios like ROE or PE. I spent most of 2017 looking at US companies so the following examples are from there.

DIN - Dine Equity
Their November financials contained a write down that eliminated earnings and cash flow for the quarter and wiped out all shareholder equity. Could still be a good company, I'm not familiar with their restaurants though I have seen an occasional TV commercial. They had a slight decline in number of stores. I can only estimate forward earnings and cash flow based on past information, compare that to their debt and then try to decide if the risk for a long term hold is worth the healthy dividend. I don't own this as I have other stocks in consumer discretionary but have an awareness of the company now.

NWL - Newell Brands
They did a very big acquisition a couple years ago and then started selling off pieces of the company which was reflected in earnings last quarter. They used the proceeds of selling to pay down debt instead of buying back stock. It is still a little early to say how the company will do going forward though I like how the remaining assets also have a reduced debt burden. Knowing they still have a few dissenting shareholders from the big acquisition, I still thought this was good management and started a small position after the selloff.

CL - Colgate, ENR - Energizer
I don't own either of these well known companies and just wanted to mention them as part of the discussion regarding ratios. Neither of these companies has much shareholder equity, Energizer because of the nature of how it was spun off from the parent company and Colgate because of the way it's stock and financials have been managed over the decades.

V - Visa
Current PE is over 50. The business model they have seems good and they have a lot of cash flow and allowing them to put a sizeable size of money towards buying back their stock. I have no idea what the price of the stock will do going forward but put a little money in this also.

I'm not sure my approach I'm using now can be called efficient though I do like how I am trying to know what I own and why.


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