welcome back everybody hope you've all been having a great week so far a few things that I want to go over in the news so one of them is President Trump has finally been acquitted this is news that was expected but this happened this week we have the US economy adding 225,000 jobs in January wages rising just a hair and then we have signs of FOMO Tesla stock surged up to historic highs and then we have a report that says that more than 22,000 investors bought Tesla stock for the first time on the Millennial favored Silicon Valley trading app Robin Hood so they bought it for the first time just over the past few days after this historic rise to me that that shows a little bit of FOMO the fear of missing out so I want to be talking about that a little bit but the main thing I want to go over today is my portfolio and specifically what I look at when I view a company and it's one that I potentially want to add to my portfolio I just want to give you a look into the type of research that I would do to try to determine whether it's one that belongs in my portfolio whether it's one that I want to have some ownership of that company so there's lots of ways to research a company I'm gonna be showing you the way that I do it now like I said first of all I want to start off with my portfolio the investing strategy that I'm doing and more generally speaking how I make the decision of if I want to buy a company or not that's the big question if we go and we look at the different stocks available here you can scroll down and look through page after page of wonderful companies these are all the companies in the S&P 500 many of them pay dividends there's a lot to look for there's lots of great companies here and the question that a lot of people have is looking at these companies I recognize some of them I like the products that some of them sell I'm interested to know whether this is a good investment whether I should buy shares of this company and everybody has different ways of looking at things different ways of analyzing things they have different things that they value in companies and different thoughts on them what I would like to do in this video is share some of the things that I look at when I'm researching a company pretty much I have a bunch of different companies in my portfolio like I can go through in your different sector I can say in consumer I have Disney and Costco and Home Depot and target and how did I come to the conclusion that I wanted to buy these companies why didn't I want to buy a bunch of different companies and consumer there are a lot of different companies ones that I don't own here why did I choose these ones over other ones I'm gonna go to the whiteboard here this is my nice little drawn line whiteboard and I'm gonna put up two different terms these are two different types of analysis so we have fundamental analysis and we have technical analysis now I think it's important to not only look at the type of research that I do which is fundamental analysis but to also look at the type of things that I don't look at the type of things that I don't value I don't value technical analysis I don't like it I don't care about it I think it's kind of hokey I don't think that there's much rhyme or reason in it there's lots of books or and about it YouTube videos written about how to do technical analysis now the reason that I don't like technical analysis is because what technical analysis focuses on is price movements charts patterns it focuses on trying to predict human behavior so you have things like this this is a real technical analysis a chart that I found off a website explaining how to do it you have things right here the dip tl derived from these two points then it goes back up and back down we have break of TL fueled by accelerating lower then it goes down and back up former support becomes resistance all this type of stuff where you're looking at charts and price movements and trying to predict whether the stock will go up or down is something that I'm so not interested in it has nothing to do with the type of analysis that I look at when I'm trying to invest in a company this isn't even something that I'm even interested in learning the basics about so if I look at these two type of analysis technicals one that I'm never going to look at I don't really care about I don't want to spend time and energy trying to learn technical analysis because fundamentally I don't like the entire idea of technical analysis I don't like focusing your money and your energy off of chart movements and pricing patterns and these type of things that I think are kind of nonsense so technical analysis the whole idea of it I don't care about I don't look at fundamental analysis is quite different with fundamental analysis you don't really care about any patterns with charts you don't care about any of this type of stuff what you look at is the actual company you're looking at the company that you're owning you're looking at the current price that is trading at and you're trying to decide whether the company is worth the price that you're paying that's the whole goal of fundamental analysis they call it the intrinsic value of the company that means that you put all the factors together is this company worth the current price its trading up so I'm way on the side of fundamental analysis I couldn't care less about what other people are doing at the pricing patterns I've said repeatedly on my portfolio that the capital gains is not that much of interest to me because a lot of buyers buy companies for stupid reasons they're not buying them because the company deserves it or it's warranted they're buying them because of the fear of missing out they're buying it because of emotion so whether a company goes up or down in value because of capital gains is something that I'm not really focused on I look at the amount of dividends the amount of cash flow that they're generating so I'm on the side of fundamental analysis if you want to learn about technical analysis you can do that there's lots of YouTube channels that teach about it there's lots of books written about it just for the record I think it's mostly nonsense now with fundamental we can break this down into two categories I went ahead and just put two terms on the board again these look similar but they're not the same word even though they start off looking similar one of them is qualitative and the other one is quantitative quantitative is only things that computers can look at this is things like the balance sheet quantitative is like your of your gross income the net income of the company the yield of the company the past two ten years of dividends being paid out and the dividend growth rate all those type of things are wrapped up in the quantitative mathematical side of research then you have another aspect which is the qualitative this is things that you can't really look at with numbers there's no formula you can just plug these things into this is stuff like the mo of a company what kind of competitors does it have and does it have a good competitive advantage over its competition does a company have good leadership are they aligned with the goals of the current sentiment of the country and the direction it's going for instance I'll give you a couple examples qualitative research would be something like when you're looking at oil companies if you just looked at the math you might say hey these are really good companies are making lots of money they're generating lots of revenue but what has been happening with oil companies they've been being hammered in the stock market because of sentiment people don't like fossil fuel people don't like working with coal they don't like investing in it they don't like being shareholders of it large institutions don't want to be associated with it because there's a negative stigma against fossil fuel that is something that doesn't fall under a mathematical formula that is a quality about those companies it's a negative quality and it's a reason you might want to avoid vesting those type of things that doesn't show up in the math so viewing both sides of this is very important now if I had a pick what side was more important I would say the qualitative aspect is more important than the quantitative so things I look at with the products of company sells the services it offers a boat it has the leadership it has I think that that is more important and more telling than the math behind a company so I'm gonna go and give you some examples to look at with both of these when you're looking at a potential company so let's go ahead and look at a couple examples of how to do this different type of research we have the quality research and we have the mathematical research looking at qualities of a company looking at the numbers behind a company first of all I want to start off with the mathematical part of it let's look at quantitative research I want to pick a company let's go with Realty income Corp okay this is a known company it's a real estate investment trust for people that don't know when you shop at Walgreens and Walmart it's very unlikely that Walmart or Walgreens owns a building that they are in those are typically owned by real estate investment trusts companies like Realty income court they own the building and then they lease it out to tenants like Walmart or Walgreens now this is a company that I really like it pays monthly dividends there's lots of things that I like about it well let's go ahead and look at the quantitative research behind it a couple things that I'd look at here first of all I would find the company and something like seeking alpha you can find this information anywhere market watch Yahoo Finance any of them work but seeking alpha lays it out I think in a pretty easy way but you search the company I can go over to dividends here I can see that it's yielding a 3. 5 1% the reason that I look at dividends with this company is because the reason that people invest in REITs is for the dividend so that's an important thing now I can go to the payout ratio 85 percent that is right where a reach should be they need to pay out about 90% of their income so it's probably bouncing back and forth between that I go to the dividend history here and you can see that this company has a long term record of raising their dividend over time so those are all good things to look at we know that this company pays dividends and it has paid dividends for a very long time but there's other things you can look at as well another page that I would look at is the key data of the company this tab right here this shows important information about the financials of the company now people go to this page you get blasted with the huge amount of data and unless you're an accountant or you're in finance you're not going to be on understand what half of this stuff is now that's okay there's only a couple things that you really need to look at here one of them is the total revenue of the company pretty much you're not looking at the expense so you're not looking at the net income of the company you're looking at how much money the company just took it from every source how much money the company took in from customers or clients I look at Realty income Corp in 2014 they brought in 933 million and then it went to a billion 1. 1 billion 1.
2 billion 1. 3 billion 1. 4 billion what does that tell you about the company right there when you see a revenue income like this that goes from 900 million to 1 billion to 1.
1 billion to 1. 2 billion 1. 3 1.
4 what does that tell you about the management and the growth of that company what it tells me as an investor is that they have an extremely stable consistently growing business there's no drastic increases one year and then declines the next they have a stable growing business that is something that's very important now the reason that this is important is because companies can raise their dividends with a declining revenue stream their payout ratio would continue to go up a good example of that was GameStop they were raising their dividend and paying a really high dividend despite the fact that their revenues were falling so you need to look at their total revenue see if the amount of money that the company is taking in is increasing another thing that you can look at that's really important is the net income this is the amount of money that the company is actually profiting after its expenses so this isn't millions as well but the net income of Realty income Corp follows as 270 million two hundred eighty million three hundred fifteen million three eighteen three sixty two 392 again year over year this company has a higher and higher amount of income this is all stuff that you can look at just with the charts you don't need to do any analysis on the company just looking at these numbers without even knowing what the company does you can assume that they have a pretty solid business model if they're raising their net income and their net revenue both at the same time so these are two things that I look at I look at the net income of the company this is the amount that they're profiting and then I look at their absolute revenue the total revenue that they have year-over-year in what direction that's going I think both of them are important because if you look at just the net income the amount that they're profiting they could be actually shrinking this could be going down but they're just squeezing more profits out of it by firing people by closing shop in different areas and saving on expenses but really they're taking in less money they're just creating a higher profit so I think looking at both of these you want total revenues to be going up and you want net income to be going up if one of them is going down while the other is going up that paints a little bit different of a picture so that's a couple basic things that you want to look at in summary when looking at a company that's a dividend paying company you look at the starting yield you see how that compares to similar companies you look at the payout ratio this is the amount that they're paying in comparison to the amount of income they have so with REITs this is supposed to be around 90 percent which it is you look at the dividend history if they have a div in a history of constantly paying dividends and raising them over time that's a pretty important thing to have if you're a dividend growth investor and then you look at the key data here on the financials of the company you want to make sure that they're growing their overall revenue and you want to make sure that their net income is growing if their net income is not growing you need to find out why you need to find out if they're just reinvesting that money back in and they're taking a loss or if they're really just struggling to make a profit so these are all important things to look at with the mathematical side of a company now another thing we can look at with the mathematical side of looking at a company is their actual website so right here I'm on Realty income Corp com they have a website that's built for investors to look at their company and the show two different aspects of their company now if I go to portfolio here and I want to know what type of properties this company owns it's a real estate company I want to look at the portfolio occupancy are they go to keeping their places leased and I look right here and has a chart of the occupancy since 1992 since then you look at and they keep it almost full occupancy every single year in fact when we went through the recession it only dropped to 96 percent occupancy the recession barely hit these guys they keep their properties rented part of that is because of the tenants they have and the other part is because of the long term leases now other data we can look at the total properties that they have look at the amount of properties that they've purchased over the in 1992 they owned 634 properties now in quarter 3 of 2019 they owned 5964 so these guys are good at purchasing new properties renting them out making a profit and then they give that profit back to shareholders like me that use it to grow my portfolio that is what this company does that is a mathematical look at Realty income Corp we know that they're a company that keeps high occupancy with properties they're a company that grows the amount of properties that they own every single year they're a company that has a relatively low starting dividend yield compared to their competitors right now they have a ok payout ratio right where it should be they have an extremely stellar dividend history and their key financials show that they're growing their total revenue and they're growing their net income Realty income Corp in my opinion right now is a buy if I was going to put a rating on it I'd say this company is a bite I think that they're a solid company with very solid fundamentals behind them so that's a company that I like owning in my portfolio now the mathematical side of evaluating a company I think is pretty easy you just look at some key data of the company and you can get a pretty good picture on whether they're profitable whether they're growing their profits year-over-year or that type of thing and you can draw conclusions from that but if you're just gonna look at the quantitative research if you're just gonna look at the math you may as well invest in UTS because robots can do that they can look at the balance sheet of a company and build a fund that invests based off the balance sheet that's something that there's lots of ETS that do that they just look at certain metrics and they either buy or sell the company solely based off of that if your goal is to just look on the mathematical side just by ETF that's what they do and you'll probably have pretty solid returns doing that but there's a whole other side to looking at companies that I actually think is more important than the mathematical side that is the qualitative research of a company and I'll give you a couple examples of what I'm talking about a company that I want to look at is Netflix this is a company that everybody's heard of everybody's familiar with and this company is not being traded based off of its book value there's no mathematical formula that would show the company's worth its current price in fact if we look at this it's trading at a p/e ratio of 95 at 366 dollars a share for the amount of money that this company actually earns that is very expensive compared to other companies far more expensive than most companies so obviously there's some reason that people are valuing this company at a much higher multiple than other companies around it people are looking at Netflix and they're looking at qualities of the company and determining that it's worth more than other companies that make similar amount of money now let's go ahead and look at some of the qualities of Netflix some of the things that they choose as their goals their premise for their company what they believe will put them in an advantageous position in the future if I go over to their investors relation website here again I can look at the long-term view and here we have some basics about Netflix and I know everybody knows about Netflix I know that everybody's aware of this company but if you actually look at what they believe you might get some different insights in it for instance it says that people love movies and TV shows but they don't love linear TV experience where channels present programs only at particular times on on portable screens with complicated remote controls now streaming entertainment which is on demand personalized and available on any screen is replacing linear TV so that's a huge basic premise of their company that linear television is being replaced by on-demand streaming that is the premise of their company if you do not believe or never believe then the premise of that company you should not invest in Netflix because that's what they believe and that's what their company's geared to take advantage of they say further on changes of this magnitude are rare radio was the dominant home entertainment media for nearly 50 years until linear television took over in the 1950s and 60s linear video in the home was a huge advantage over radio and very large firms emerged to meet consumer desires over the past 60 years the new era of streaming entertainment which began in the mid 2000s is likely to be very big and enduring also so do you see how much you can learn just from reading two paragraphs of their long-term view here they believe that this type of streaming is going to be extremely transformative to the way the people consume entertainment and you can already see that playing out they believe that it will be the type of thing from when entertainment was mostly just on the radio - when linear television was first introduced in the home they believe the same thing can happen with linear television now moving over to streaming and their position as a company to be what they call quote one of the leading firms of straining entertainment that's circle they want to be one of the leading for in the streaming world that they believe is the future of entertainment so if you look at a company's goal and the the statements they're making and you don't believe what the premise or the conclusions that they're drawing you shouldn't invest in a company if they're saying that they think that streaming is going to replace linear television and you think I don't think that stream is going to replace linear television I think linear television will still be very big and prominent it's not going to go anywhere and I think that streaming is just going to be this kind of niche thing then you shouldn't invest in Netflix because they're not positioned for that premise there they're positioned for the premise that linear television will continue to slowly die and streaming will continue to slowly gain subscribers and new people now reading on this page is just full of qualitative aspects of the companies their goals the way that they want to do things the way that they don't want to do things this is aspects of the company that are extremely important that can't be put in the mathematical formulas this is qualitative research I think that this is the most important part of looking at a company for instance we look at content people love they explain their goal of how they're going to curate content that satisfies the desires of people that have very different interests in the type of content they want to consume Netflix wants to satisfy people with a wide range of content they have Netflix is focus this is the part that they are focused on one specific goal and part of this it says that Netflix is a focused passion brand not I do everything brand Starbucks not 7-eleven Southwest not United HBO not dish we don't offer pay-per-view or free ad-supported content those are fine business models that other firms do really well we are about a flat fee unlimited viewing commercial-free another section here they highlight competition now if I was to ask somebody what is Netflix is competition the go to in your mind is likely will be got HBO we got Hulu we've got YouTube TV we got Apple TV Amazon Prime we have all these other competing services right Netflix has a different idea of what their competition is they call it the moment of truth thing that you do when you're seeking entertainment and the chance to relax they say we compete for a share of our members time and spending for relaxation and stimulation begins linear networks pay-per-view content DVD watching and other Internet networks video gaming web browsing magazine reading video pyar and much more over the coming years most of these forms of entertainment will improve if you think about your own behavior any evening or weekend in the last month when you did not watch Netflix you'll understand how broad and vigorous our competition is that right there that sentence gives you an idea of what Netflix considers its competition pretty much anything during your free time in your evenings when you've had a chance to relax and you have a variety of different options of what you want to do Netflix considers pretty much everything else competition if you browse Facebook Facebook is now competing with Netflix if you're on Instagram and just browsing through a messaging people you are competing with Netflix all those type of things take you away from Netflix they consider a competition they say we strive to win more of our members quote moment of truth when those decisions are say at 7:15 p. m. when a member wants to relax enjoy a shared experience with a friend or family or is bored the member could choose Netflix or a multitude of other options now see how much you can learn about a company and their goals and their competition and things that they're facing the direction they're going with just a couple minutes of research it doesn't take that long this has really just been a couple things and you can gain a lot of information about the company I could continue on with Netflix and learn more about this company but I think you get the idea the idea is to know what you own that's what Peter Lynch says he says if you're gonna pick out your own stocks if you're not gonna invest in just an ETF and follow the market if you have specific companies that you're interested in owning at least do a basic level of research there's lots of basic things that you can look at what the companies that you're invested in and it only takes a couple minutes when I look through the different type of companies that I wanted to own I look through all those different qualitative aspects of is this a company that I want in my portfolio now my portfolio in specific I follow a a specific investing strategy that dividend growth investing strategy where I primarily invest in companies they have been paying dividends and have been raising dividends over time and within that I try to identify what I think are the best of class within those metrics so that's my portfolio if you're interested in looking at this portfolio there's a link in the description of this video that says my main portfolio if you click on that it will open it up and you can look at all the for Holdings that I have okay I want to move on and talk about some news we have the president Trump impeachment this whole thing has come to an end he was acquitted there was a vote only one person voted against party lines so it pretty much went down party lines but Mitt Romney one person voted against him I first want to say that this fall is kind of what I thought it would be where investors I don't think ever really cared about this investors care about uncertainty the acquittal hair this is something that was a pretty certain outcome all the Republicans except for one voted in favor of acquitting him and since the Republicans had a bigger majority he's acquitted that's exactly what happened there now moving on from less divisive and more positive news we have the jobs report the jobs report was great we have 225 thousand new jobs being added the unemployment rate actually went up a little bit which doesn't you know make sense right on the surface because you have more people getting jobs but you also have the unemployment rate going up that just means that people that weren't even looking for jobs people just living off of social safety nets or with family members now they're deciding to enter in the labor market they're applying for jobs and looking for them so the unemployment rate going up a little bit is actually a positive thing because we have more people that weren't working now looking for jobs and on top of that we have better than expected wage growth it says that wages climbed 3.
1 percent from a year earlier a touch stronger than December's rise of 3% these are all pretty strong numbers it bodes well for the economy and if the economy does well then the stock market will likely would do really well now the last bit of news that I'll mention is Tesla this stock I think we're seeing a lot of FOMO which is the fear of missing out this is a thing that a lot of new investors get into where one stock goes berserk and after it's already gone berserk and gone up tremendously that's when people buy it right what you don't want to do is you don't want to be the person that buys it at the very top you want to be the person that buys it down here that's where you want to have bought it now FOMO is a real thing the fear of missing out is a real emotion that people have they see something that's exciting that has a lot of people involved in it and they want to be a part of it you're afraid of missing out on future returns with this stock I do not believe that FOMO is a good investing strategy because what it leads you to do is being a shareholder at the tail end of a mess one that you're already buying after significant moves have happened so we got a report here that says that more than 22,000 investors bought Tesla stock for the first time on Robin Hood in the past three days 22,000 investors on Robin Hood bought Tesla stock when it was at this price for the first time they've never owned the stock I bet a lot of them it wasn't even on their radar they didn't really even care about the company all that much but now that it's had this crazy Ronning has gone up in price now they're a shareholder of it now what I don't want to do is give the impression that I'm against Tesla I think that Tesla is a really good company it's probably the coolest car company that exists the reason that you should buy this stock if you're jumping into it now is because you believe that Tesla will be the biggest car company in the world you shouldn't buy it because it's exciting and you're afraid of missing out on the excitement that's not a reason it will keep you invested when there's a high amount of volatility if it drops down to $600 a share 550 and you're just invested in it because well there's a lot of news articles about it it seemed like fun to invest in it might be harder for you to hold on to the company then if you do some research about it and if you really agree with its outlook so I think that Tesla is a great company I'm not telling people to sell out of it I'm not telling people that it's a bad investment but I also don't think the fear of missing out is a great reason to jump into a company so make sure you know about the company you know about their goals and you're in it for the long run if you're going to buy stocks at this price okay let's get to some emails here Joseph Carlson show at gmail. com that is Joseph Carlson show at gmail.
