How to Invest and Pick Stocks with 00 using Value Investing and Old School Value
Lester and Old School Value team up to create this case study of how to invest 00.
00 belongs to Lester who is new to value investing. He will be following this process of finding stocks to buy for this stock portfolio.
The portfolio will be based on Robin Hood (https://robinhood.com/) to eliminate trading costs for such a small portfolio.
We will track all activity and results to share and see how 00 can grow.
* Old School Value https://www.oldschoolvalue.com
* Action Score backtest and simulations report: http://bit.ly/2swc7ry
* Piotroski F Score paper: https://www.chicagobooth.edu/~/media/FE874EE65F624AAEBD0166B1974FD74D.pdf
* Cash Return on Invested Capital CROIC: https://www.oldschoolvalue.com/blog/valuation-methods/roe-croic-roic-formula/
* The Gross Profitability Premium: http://rnm.simon.rochester.edu/research/OSoV.pdf
What You’ll Learn
In the video we go through topics such as:
– Why choosing stocks with a high Quality, Value and Growth score is important
– How we came up with our value investing and quant strategy called “Action Score”
– What value metrics and ranges make up the Action Score
– How to read and interpret the scores and value metrics you see
– How you can achieve market beating returns by picking stocks from the A and B ranked universe
– Would you choose Gamestop (GME) or Facebook (FB)?
– What about Nu Skin (NUS) vs Gilead Sciences (GILD)?
– How to avoid value traps and certain industries and sectors
– The process we take to create a stock shortlist
– Tips to quickly filter and sort through a universe of stocks to find the best quality, value and growth
– Rules of thumb we apply when picking stocks
– When to buy and sell
– Best practices for allocation strategies
[00:39] General overview of the Action Score System
[01:23] How the Action Score works
[03:37] Core metrics we use in Old School Value
[07:31] Focus on higher grade stocks
[11:36] Focus on high Action Scores
[13:24] What is a Trifecta stock?
[14:20] B Grade stocks (Sleeper, Munger, and GARP stocks)
[17:11] C-D Grade stocks (Mom & Pop, Value Trap, Darlings)
[17:57] F Grade stocks (Red flag stocks)
[18:27] Additional reasons for red flag stocks
[20:28] Comparison of A Grade and B Grade companies (GME & FB)
[22:42] Controversial picks (GILD & NUS)
[25:24] Things to keep in mind when creating your shortlist
[32:12] General rules of thumb
[37:17] Rules for buying & Selling
[39:52] Lester’s mission for episode 2