P K - Excellent comment. I appreciate the compliment on my "meticulous detailing," albeit the goal is always to keep investing super simple.
Your two added suggestions are outstanding ideas.
1. I agree it is very important for investors to understand the whole of the earnings vertical: gross sales to operating revenue, gross margin to net margin, and operating cash flow to free cash flow.
2, You are right-on in focusing on insider ownership instead of insider sales. Ownership is an indisputable buy-in and incentive to perform, whereas sales of company stock by insiders may have nothing to do with company performance and simply be an exercise in an expiring option, raising cash to pay tuition, sponsoring a wedding, buying a vacation home, or reluctantly satisfying a financial advisor's or estate planning attorney's prudent advice to diversify from an overallocation of company stock.
Most importantly, your comment reminds fellow investors that it's okay and expected that their checklist may be different than yours or mine, but having an investment checklist could lead to better, more predictable results.
Thanks again for your contribution to the book segment! Best regards, David
Dear Mr. Waldron,
I appreciate your insightful article and the meticulous detailing of the checklist. Permit me to propose two valuable additions:
1. Gross Margin:
- Rationale: Evaluates the company's adeptness in managing production costs.
- Importance: Robust gross margins signify resilience amid economic challenges.
- Guidance: Prioritize companies with consistently strong gross margins (>50%) to avoid transient success.
2. Skin in the Game:
- Rationale: Aiming for a partnership between management and myself in the business.
- Importance: Companies with insider ownership equal to or exceeding 10% historically outperform the market.
Best Regards!
P K - Excellent comment. I appreciate the compliment on my "meticulous detailing," albeit the goal is always to keep investing super simple.
Your two added suggestions are outstanding ideas.
1. I agree it is very important for investors to understand the whole of the earnings vertical: gross sales to operating revenue, gross margin to net margin, and operating cash flow to free cash flow.
2, You are right-on in focusing on insider ownership instead of insider sales. Ownership is an indisputable buy-in and incentive to perform, whereas sales of company stock by insiders may have nothing to do with company performance and simply be an exercise in an expiring option, raising cash to pay tuition, sponsoring a wedding, buying a vacation home, or reluctantly satisfying a financial advisor's or estate planning attorney's prudent advice to diversify from an overallocation of company stock.
Most importantly, your comment reminds fellow investors that it's okay and expected that their checklist may be different than yours or mine, but having an investment checklist could lead to better, more predictable results.
Thanks again for your contribution to the book segment! Best regards, David