Investment Strategies: Research Tools In Maintaining Our Investment Portfolios

Posted originally on: November 16, 2018. Manila. Revision Date: August 11, 2019

Analyst, financial planners, investment planners or a simple investor a like have their own personal preferences when in comes to their investment criterias.  Picking the investment criteria may be based on different factors such as age, economic situation of an individual, weather, risk tolerance of an individual, or even personal preferences to mention a few. Some investors just jump right in without thinking and others over analyze to the point they miss the opportunity of the market momentum.  Having a method in analyzing your portfolio is a good start in order to successfully manage it.

The following research method or process is a sample used in analyzing and making decisions in our portfolios:

  • Top Down Analysis
    • Economic Analysis
      • Market Indices (Dow Jones, NASDAQ, S& P, Russell and others)
      • Federal Rates and economic policies
      • Price of Gold,
      • Treasury Rates
      • payroll rates and unemployment
    • Industry Analysis –
      • Segmentation Analysis,
      • Competition Analysis,
      • Complimentary Product Analysis,
      • Business Cycle (Question Mark, Star, Cash Cow and Dogs)
  • Financial And Technical Analysis
    • Income Statement, Balance Sheets, Cash Flows
    • Ratio Analysis
    • Technical Analysis
    • Dividend Sustainability DIVIDEND PER SHARE SHOULD ALWAYS BE HIGHER THAN EARNINGS PER SHARE for long term sustainability
  • Research Materials from Financial Institution Brokers and Partners (Not Disclosed Due to Security Reasons) research materials
    • research materials
    • upgrades and downgrades
    • earnings release
    • ipo calendars
  • Newspapers and Media (make sure the news feeds are timely and reliable)
    • Bloomberg
    • WallStreet Journal
    • Forbes
    • Google
    • Yahoo
    • MSN
    • Dun and Bradstreet
    • Barrons
    • IBD – Investors Business Daily
    • CNNFN
    • BBC

Having an investment criteria or method in place allows investors and individuals to properly evaluate each investment opportunities and be able to decide properly and on a timely basis.

Investment Strategies: How Safe is the Company´s Dividend

There are two ways to earn in the stock market, Capital Appreciation (Capital Gains) and Dividend Payout.  Capital Appreciation or Capital Gains is the increase in the stock price since the stock was bought (current price of the stock mind purchase price).  Dividend Payout on the other hand is when the company elects to pay out a sum of money to the shareholders for each share an investor holds.  Not all companies payout dividends.

Investors should understand that the dividend payout can change at anytime and should be ready to make quick decisions when this happens because this could also affect the price of the stock and could affect the capital gains

Following are some of the things to look for in analyzing a company´s Dividend Payout Sustainability:

  1. High Dividend Yield – Watch out for high dividend yields.  Investors who are worried about dividends being cut or discontinued usually starts to sell their stock holdings in the company.  This pushes the dividend yield higher.
    • Dividend Yield Ratio
  2. Debt Load – Companies that are highly leverage compared to their peers in the industry in the long run may trigger the company to cut their dividend pay to their investors.
    • Debt to Equity Ratio
  3. Poor Fundamentals – Look if the revenue or net income is higher than the dividends being paid out.  Companies that are paying dividends higher than the companies earnings per share tend to cut dividends in the long run.
    • Earnings Per Share
    • Revenue Growth
    • Dividend Per Share

There are other fundamentals that should be considered but knowing the warning signs by using the above analysis should be a good start.

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