Find Top Stocks Fast with Predictive Metrics | Cheatsheet
ValueRay's Cheatsheet simplifies stock selection ✓ Quickly identify high-potential stocks using proven predictive metrics and make better investment decisions.
Top Stocks - Selected by proven GARP Predictive Metrics and percentile based Peer-Group Analyses
| Symbol | Market Cap | 12m | 5y | P/E | PEG | RoE |
|---|---|---|---|---|---|---|
| AM NYSE Antero Midstream Partners |
9.00B | 33.4% | 379% | 21.84 | 1.17 | 19.75 |
| PRU TO Perseus Mining |
3.51B | 67.7% | 246% | 10.00 | 0.16 | 36.72 |
| KNSL NYSE Kinsale Capital |
11.0B | 22.6% | 211% | 27.17 | 1.80 | 28.14 |
| SKWD NASDAQ Skyward Specialty Insurance |
2.35B | 70.1% | 291% | 20.28 | 0.72 | 15.68 |
| AWI NYSE Armstrong World Industries |
6.72B | 32.6% | 107% | 24.81 | 1.66 | 37.34 |
| CAMT NASDAQ Camtek |
3.10B | -39.9% | 485% | 26.07 | 0.98 | 24.08 |
| RMD NYSE ResMed |
36.6B | 18.5% | 58.8% | 27.71 | 1.47 | 25.18 |
| PDD NASDAQ PDD Holdings |
141B | -33.4% | 29.5% | 10.72 | 1.20 | 38.61 |
| GCT NASDAQ GigaCloud Technology |
705M | -44% | 13.5% | 6.04 | 0.37 | 31.90 |
| NICE NASDAQ Nice |
11.2B | -1.47% | -12.2% | 24.51 | 1.19 | 13.19 |
The Four Principals of Profitable Investing
1. Find Economic Moat
- High customer switching cost or effort
- Unbeatable Prices
- Intangible Assets (Patents, Trademarks, Copyrights, Approvals, Brand Names, Geographic Advantage)
- Network Effect (Being the first mover -> Winner takes it all = legal Monopolists)
2. Buy at Fair Value or below
- What is a low valuation for this company? (Historical P/E, P/B and P/S over the last 10 Years)
- Discounted Cash-Flow Valuation (with a Margin of Safety)
3. Let it Compound
- Avoid Trading (Commissions, Taxes, you will miss the best spots anyways by 10%)
4. Know when to sell
- Realizing it was a mistake to buy it at the first place.
- The stock became wildly overvalued (P/E Forward, PEG in the 90+ percentile of its peer group).
- The company's moat has been destroyed or fundamentals are deteriorating.
- You need the money to buy a house for your family (Do it, allways invest in inner peace and lifestyle).
Make money by not loosing it:
- Risk Management: Take the opposite position and evaluate the risks, not just the chances (Stop Loss, Opportunity Costs).
- Highest-Quality only: Choose stocks so valuable, that you'd happily pass them on to your children.
- Rigorous Selection: If you could buy every year only one stock, would you still buy it?
Generic Screener Recommendations
- Average Volume > 250,000 (> 1,000,000 for Options-Trading)
When you're looking at stocks, it's a good idea to check if they have more than 250,000 shares traded on average each day. This usually means a smaller spread, making it quicker for you to buy or sell when you need to. - Market Cap > $500 Million (> $5,000 Million for Options-Trading)
Avoid Nano Cap stocks, this helps to reduce the risk of share price manipulation. - Price > $7
Avoid penny stocks, they often come with information problems and a high risk of being manipulated. - Age > 2 years
For solid research, make sure you have access to at least two fiscal years or 8 quarters of key financial data: balance sheets, income statements and cash flow reports.
Recommended Fundamental Ratios
Sources: McKinsey 1,
McKinsey 2
Profitability
- ROIC > 15%
Look for companies with an ROIC greater than 15% for a more profitable investment choice. - Net Profit Margin > 25%
Net Profit Margin is a good indicator of how profitable a company is at the most fundamental level. Compare it to the industry average to see how well the company is doing. - FCF Margin > 7%
Free cash flow is the amount of cash a company has left over after it pays for its operating expenses and capital expenditures. FCF margin is how much free cash a company generates relative to its revenue.
Growth
- Revenue Growth > 10% YoY
Key Driver of Long-Term Stock Performance. - EPS Growth > 10% YoY
Leads to higher stock prices, hence most investors use Discounted Cash Flow (DCF) to value stocks.
Debt
- Net Debt / EBITDA < 3
- Net Debt / Free-Cash-Flow < 4
- Debt / Equity < 80%
- RoIC > WACC
How to identify the best stocks to buy by analyzing the earning sheets?
Business
- Low volatility of margins
Historically, gross margins should be stable and predictable - Pricing power
High gross margins > 30% - Low Capital Intensity
CAPEX/Sales < 5% and CAPEX/Operational Cash Flow < 15%
- Skin in the Game
Owner & Family > 20% of shares (as example the Lundin Family owns a high amount of the shares and allways wins the vote)
How to identify Best Stocks to Buy by comparing financial ratios?
Business
- Moat
Sustainable, high Return on Invested Capital (ROIC > WACC) with recurring revenues, high gross margins and low capital intensity - Pricing Power
Best CAPEX/Sales in Peer-Group
- Reinvest for organic growth (ROIC > 20%, historically stable)
- Acquisitions (hard to predict which M&A creates value; 60%-90% don't)
- Share buybacks (better than dividends)
- Dividends 20% - 35% of EPS (only in absence of value creating alternatives)
How to Analyze a Stock
Understand the Product
- Annual Reports
- Investor Presentations, Shareholder Letters
- In which different segments does the company make money (Reliance on one product or group of customer?)
- How does the geographical split look like (Geopolitical Risks?)
- There are 1,000 resons to sell a stock, but only ONE to buy. So, which Insiders are buy/holding their stocks?
- Check ROIC curve of the last 3-5 Years, the more stable the higher the Moat. No competition = legal monopoly.
- CAPEX/Sales < 5%
- CAPEX/Operating Cash Flow < 15%
- Interest Coverage Ratio (EBIT/Interest payments) > 10
- Net Debt / Free Cash Flow < 4
- Gross Margin > 30
- FCF Margin > 20 (highly depends on the industry)
- Yearly Revenue Growth > 5%
- Yearly Earnings Growth > 7%
- Secular trend (urbanization, aging, cybersecurity, obesity, digital payments, …)