A stock which is currently selling below it's true value. This stock is predicated to at least rebound to it's current level. (Investpedia - definition)Small Cap Stock
Companies with market values between $100 million and $2.5 billion to qualify as a small cap. (See previous post)
References:
The Motley Fool - Foolish 4 Investing Strategy
The Motley Fool - Farewell to Foolish 4
Price: $??.??
Notes and observations about the stock
Fundamentals:
Questions to be Asked
- Free Cash Flow: Cash Flow from Operations - Capital Expenditures
- Market cap: Current Share Price * Total Shares Outstanding
- Debt: Total Liabilities + Short Term Liabilities
- Enterprise value: Market Cap - Cash + Debt
- True Value: Market Cap / Total Shares
- P/E: Researched
- 5 year earning estimate: Researched and Best Guess
- PEG: P/E divided Earning Est
- Sector P/G Rating: Researched
- Operating Income/Loss: Total Income
- Y/N - Company has Positive Cash Flow
- Y/N - Stock is priced under $10.00
- Y/N - Stock is under valued - Est. value is $?.??
- Y/N - Is Small Cap Stock under 1 Bill market cap
- Y/N - PE is below sector average
- Y/N - Last quarter was profitable
- Y/N - YTD was profitable
- Y/N - Last Year was profitable
- Y/N - Has positive quarterly estimates
- Y/N - PEG is less then 1.0 (Only if profitable and has earning estimates)
- ???? - chart patterns
Screen-Based Investing.
Many quantitative analysts use "screens" to select their investments, meaning that they use a number of quantitative criteria and examine only the companies that meet these criteria. As the use of computers has become widespread, this approach has increased in popularity because it is easy to do. Screens can look at any number of factors about a company's business or its stock over many time periods.
While some investors use screens to generate ideas and then apply fundamental analysis to assess those specific ideas, others view screens as "mechanical models" and buy and sell purely based on what comes up on the screen. These investors claim that using the screen removes emotions from the investing process. (Those who do not use screens would counter that using a screen mechanically also removes most of the intelligence from the process.) One of the proponents of using screens as a starting point is Eric Ryback, and one of the most famous advocates of screens as a mechanical system is James O'Shaughnessy.
Things to check out:
The more the better, nuff said.
Information to do the calculation can be found on "statement of cash flows"
The calculation: Cash flow from operations - capital expenditures
From Motley Fool - Free Cash flow defined
Small caps give investors the edge, because institutions tend to ignore them and analysts don't cover them. By the time anyone realizes they're there, they've already grown much larger, and appreciated in price.Rule: Company must have had a "surprise" of 20% or more in last quarter
Companies with market values between $100 million and $2.5 billion to qualify as a small cap.
"The greatest gains from stock investing are to be found not among the Googles of the world, the well-known, much-loved and overanalyzed large caps. They're found in the tiny corners and crevices of the market, where analysts have yet to tread."
The Motley Fool
Seek companies that had an earnings surprise of 20% or more last quarter, but also have the prospect of growing earnings at least 20% annually for the next five years, according to analysts.Rule: Seeing Lots of Volume? Beware of institutional traders
The Motley Fool
Many investors say volume is where the large institutional traders leave their footprint on the market.
From Yahoo Investing
In other words, I want my small caps to sell at bargain-basement prices. An EV/FCF ratio of 10 or less gets my attention real quick. Anything pricier than that, I need to take a good hard look at the company's growth rate and EV/FCF/G ratio.Rule: PEG should be less than one.
Calculation looks like the following;
Free Cash Flow = Cash flow from operations - capital expenditures
Market cap = current share price * total shares outstanding
Debt = long-term debt + short-term debt
Enterprise value = market capitalization - cash and equivalents + debt
From The Motley FoolAfter some consideration, I decided to remove this rule. I believe that the guess part leads to areas where I can make errors in judgment. I do reserve the right to come back and examine this. (Plus I'm not sure I understand all of this one)
A ratio used to determine a stock's value while taking into account earnings growth. The calculation is as follows:
Calculated as a stock's P/E ratio divided by its projected year-over-year earnings growth rate. In other words, the ratio measures how cheap the stock is while taking into account its earnings growth. If the company's PEG ratio is less than one, it is considered to be undervalued.
From Investpedia - Definition
Value stocks are trading for less than their apparent worth and have potential to get back to and surpass there apparent worth.
Growth stocks are trading higher than their apparent worth but have potential to outgrow there current worth.
From Investpedia
Stocks I noted watch on Friday 08/03/2007:
CHNG - googlePrice: $6.65
Recommended on caps site, This is a wild guess in the dark as I have not learned anything yet.
This is an OTC stock which may cause problems when trying to trade.
Price: $6.26TGB- google
Recommended on caps site, This is a wild guess in the dark as I have not learned anything yet.
I noticed that it only had 12 thumbs up which is very low. Could be a pump and dump
Price: $5.10
Recommended on caps site, This is a wild guess in the dark as I have not learned anything yet.
