Great idea! I always struggle with the exit. Here are two very different stocks: 1) ASML, weighted average purchase price is about $695. 2) OXY, weighted average purchase price is $46 and with the Iran war, I am wondering if I should sell to the war fear or hold on for about +2 years for OXY to have a dividend payout ratio of +25% and the resulting re-rating. You can pick one and decide. Thank you!
Thank you Gary for sharing your PULSE framework for this company. It does help having an expert opinion to guide us through what we should be looking for with the fundamentals.
I do have a question about the growth cycle of the company. Do you have a specific method for identifying growth as a factor for the business? I'm curious because you mentioned that it is in a growth phase and wanted to identify it for myself. For example, let's say I found a company that has begun to produce stable cash flows from the last two years and it is increasing year over year.
Do you have a specific method for finding such companies?
Thinking about growth is a broad topic. For the purposes of the PULSE screen, which by necessity doesn't go deep, I am looking at cycle-to-cycle FCF growth (it's one of the cells you will see on the bottom of the template). I am also looking at it more approximately by seeing how much or if at all Economic Profits and Underlying FCF is rising over time in the top two charts. That informs the level of 'S' and 'E' that I would find interesting.
Again, just to be clear, PULSE is a great framework to quickly get to the heart of a company's key historical financials and current valuation to quickly decide if it's worth further work. At that later stage, you would want to go a lot deeper. Any method that tries to do something very quickly will necessarily make both type 1 and type 2 errors on occasion, but in my 10+ years of using this template/framework I found this approach to be great and the error rate acceptably low.
Great idea! I always struggle with the exit. Here are two very different stocks: 1) ASML, weighted average purchase price is about $695. 2) OXY, weighted average purchase price is $46 and with the Iran war, I am wondering if I should sell to the war fear or hold on for about +2 years for OXY to have a dividend payout ratio of +25% and the resulting re-rating. You can pick one and decide. Thank you!
I added both to the pipeline and will aim to do at least one of them for this Friday's video post.
Thank you very much!
Thank you Gary for sharing your PULSE framework for this company. It does help having an expert opinion to guide us through what we should be looking for with the fundamentals.
I do have a question about the growth cycle of the company. Do you have a specific method for identifying growth as a factor for the business? I'm curious because you mentioned that it is in a growth phase and wanted to identify it for myself. For example, let's say I found a company that has begun to produce stable cash flows from the last two years and it is increasing year over year.
Do you have a specific method for finding such companies?
Thinking about growth is a broad topic. For the purposes of the PULSE screen, which by necessity doesn't go deep, I am looking at cycle-to-cycle FCF growth (it's one of the cells you will see on the bottom of the template). I am also looking at it more approximately by seeing how much or if at all Economic Profits and Underlying FCF is rising over time in the top two charts. That informs the level of 'S' and 'E' that I would find interesting.
Again, just to be clear, PULSE is a great framework to quickly get to the heart of a company's key historical financials and current valuation to quickly decide if it's worth further work. At that later stage, you would want to go a lot deeper. Any method that tries to do something very quickly will necessarily make both type 1 and type 2 errors on occasion, but in my 10+ years of using this template/framework I found this approach to be great and the error rate acceptably low.
Thank you for clarifying. That makes sense too and it's helpful to see where the PULSE frame helps and where I should begin looking.