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Tom Engle taught me to build positions in great growth stocks at "better and better value points" over time
Here's how to do it:
Say I wanted to gradually build a position in $SBUX from scratch
1) Pull it up in Yahoo Finance. Click on "statistics"
Here's how to do it:
Say I wanted to gradually build a position in $SBUX from scratch
1) Pull it up in Yahoo Finance. Click on "statistics"
2) Pull up my "Buy/Sell" tab of my public spreadsheet
https://docs.google.com/spreadsheets/d/1y8quPLqAwNsBGvNUrJuMTqVwz-P59ms1A8ZDLE8Dc24/edit?usp=sharing
https://docs.google.com/spreadsheets/d/1y8quPLqAwNsBGvNUrJuMTqVwz-P59ms1A8ZDLE8Dc24/edit?usp=sharing
3) Assume I wanted to build my position in $1,000 increments
$SBUX price right now is $75.49
$1,000 buys me about 13 shares
$SBUX price right now is $75.49
$1,000 buys me about 13 shares
4) After I buy, I fill in the data in the spreadsheet
Making note of:
Ticker: $SBUX
Date: 7/25/20
Price: $75.49
Shares: 13
(Yahoo statistics data:)
Trailing P/E: 26.9
Forward P/E: 27.5
Price/Sales: 3.4
Forward Annual Dividend: 2.17%
Making note of:
Ticker: $SBUX
Date: 7/25/20
Price: $75.49
Shares: 13
(Yahoo statistics data:)
Trailing P/E: 26.9
Forward P/E: 27.5
Price/Sales: 3.4
Forward Annual Dividend: 2.17%
5) Then I wait & watch
If thesis =
and I have new money to invest, I look to add
The goal of next purchase is to buy at a BETTER VALUE POINT (
P/E, P/S, 
dividend yield), which MAY OR MAY NOT be at a LOWER PRICE
If thesis =
and I have new money to invest, I look to addThe goal of next purchase is to buy at a BETTER VALUE POINT (
P/E, P/S, dividend yield), which MAY OR MAY NOT be at a LOWER PRICE
6) In other words, I'd want my next purchase to be at a
Trailing P/E < 26.9
Forward P/E < 27.5
Price / Sales < 3.4
Dividend Yield > 2.17%
This is possible in 2 primary ways
$SBUX financials = or & price
or
$SBUX financials & price < financials
Trailing P/E < 26.9
Forward P/E < 27.5
Price / Sales < 3.4
Dividend Yield > 2.17%
This is possible in 2 primary ways
$SBUX financials = or
& price or
$SBUX financials
& price < financials
7) Ideally, you'd buy the same stock over and over again at better and better values, EVEN IF THE PRICE IS HIGHER EACH TIME
That's great, so long as revenue / net income / dividend are growing FASTER than the share price
That's great, so long as revenue / net income / dividend are growing FASTER than the share price
8) Sometimes, this isn't possible
With $SHOP, for example
If the business is
, you might have to add at worse value points
That's OK, so long as the business is vastly outperforming your expectation, or something has changed for the positive
With $SHOP, for example
If the business is
, you might have to add at worse value pointsThat's OK, so long as the business is vastly outperforming your expectation, or something has changed for the positive
9) Tom Engle is a big fan of using the Cash Flow Yield as a value point
Which is:
Free Cash Flow (Cash From Operations - Capital Expenditures) / Market Cap
This is not an easy metric to find/track, but he's smarter than me, so feel free to use it, too
Which is:
Free Cash Flow (Cash From Operations - Capital Expenditures) / Market Cap
This is not an easy metric to find/track, but he's smarter than me, so feel free to use it, too
10) I love this system
You're steadily building your position as your confidence & knowledge about the business grow
Remember: knowledge compounds too!
You're steadily building your position as your confidence & knowledge about the business grow
Remember: knowledge compounds too!
11) Tom Engle also scales OUT of a business in the same way
He wants to SELL at higher and higher value points over time
And then roll the proceeds into the next growth stock!
He wants to SELL at higher and higher value points over time
And then roll the proceeds into the next growth stock!
