Saturday, May 15, 2010

Stock Fishing

I always have a running list of great companies I would buy if they were priced a whole lot differently- my wish list you might say.  Being value investors we all spend a lot of time trying to differentiate between garbage and gold. Usually when I am looking at a company it has hit my screens because it is suddenly cheap - my job is to find out if there is a good reason or a bad reason for this, and invest accordingly. This activity can take some time, days, sometimes even weeks. Some opportunities simply don’t last that long though, they can dry up in a matter of a day, an hour or even mere minutes.

To prevent a great opportunity from slipping through my fingers I often have a running wish list. This list is comprised of high quality companies with great leadership, and solid books, they meet all but one of my criteria to invest- they aren't trading at a discount. The P/E might be too high or the dividend yield is just not where I need it to be.

As an example let’s pull three off my list Visa, Cisco and P&G. In my opinion great companies with great management, great products and a solid sustainable competitive advantage. The reality of it is though that they all sport a P/E that is far too high to merit an entry point- in my opinion. During turbulent days though like last week these stocks drop by impressive rates. At these times my wish list turns on and we buy what we can. On news of the sudden crash I was out having lunch and quickly returned back to my office to file a few trades from my list.

So what do you have on your buying wish list and why?

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