- What is going on you guys, welcome back to the channel. In this video today, we're going to be going
through step by step, my exact process for how I pick what stocks to invest in. So obviously guys, there's a lot of new people
flooding into the stock market, and there's been a lot of hype around certain stocks out there such as GameStop and AMC, and there's been some
people that have made a lot of money from those stocks, but there's also been a lot of people who may have lost a lot
of money on those stocks. And maybe you got burned in the past and you wanna learn a
little bit more about how to research stocks before you invest in them. Well, that's exactly what this video is going to show you today is my exact step-by-step process for how I choose what specific stocks to invest in. Now, obviously guys, everyone out there is going to have some big winners and some big losers, but I just wanna share with
you guys a couple of my own picks from the last couple of years, just so you know that I'm not some idiot out there who is
not good at stocks, okay? So a lot of people remember me in 2016 being very outspoken
about a stock called AMD or Advanced Micro Devices. I actually bought shares back
when it was 6.82 per share and now that stock is
around $100 per share. I wish I could say I still held onto it but I sold it shortly
after I bought it but that was a pretty good investment there. I also bought low stock during
the peak of the pandemic and I've seen almost a 100% return on that investment in a
very short period of time. I got into Boeing after the
pandemic and I had a solid 40 or 50% gain there in the short term. I've also done well
with an ETF called JETS. I also owned Amazon and a lot of other big tech companies, Amazon, Apple, Google in the past,
I've done well on those. And so I have had, you know, a number of stocks in
the past that I've owned that have significantly
outperformed the market. Now, of course, there's no guarantee that you're gonna make a good decision when you pick a stock, but what I wanna encourage you to do is five minutes of research minimum before you hear about a stock
on Reddit or on social media and you decide let me put a ton of money into it. Maybe pause a little bit here
and go through this video and learn about some basic stock research. Because here's the thing guys, we know that GameStop stock, for example, was trading based on something called speculation, which is essentially people piling into it because of how much it's gone up already. It wasn't based on the
underlying fundamentals or the health of that company, it was simply a big trend that people were trying to capitalize on. Now, I have no idea what's
gonna happen with GameStop or AMC in the future, I personally decided to avoid those stocks just because, you know, it seemed very risky
and speculative to me, but, you know, what you
wanna do is potentially before you make a decision like that, a little bit of research
can go a long way. Real quick guys as well, this video was sponsored
by an app called Front, which is 100% free and helps you easily conduct
stock market research. It's honestly pretty complicated to study a lot of the fundamental data and things like that
surrounding a company, but Front makes it easy by giving you a very simple to understand score called the Fisco score, kinda similar to a credit score. Essentially it looks at the
financial health of the company and a number of different factors to give you this overall wellness score around this investment. And of course guys, there is no guarantee that
because of a good score that a stock is gonna go up or down, but the more data that
you have available to you is just gonna help you
making a better decision with your money. So there's a lot of different resources that I personally use
when researching stocks. I'm gonna show you all of them, but in particular I'm
excited to show you guys how to use Front. Again, it's completely free. Down the road, they might
offer a paid plan but I see this as a really easy
way to get an overall snapshot of a given company and just to get an idea of, you know, something similar to a credit score of, you know, does this company
have a phenomenal credit score or is it, you know,
something closer to the 600s? So I find this to be a
really useful indicator of the overall health of a company. So more on that later guys but definitely gonna wanna check
out that free app Front down in the description below, if you think it's going to help you make better investment decisions, and based on my own investing I would say it's a pretty sure bet that it will. Now, just to make sure that you guys are in the right place here, I wanna cover what we're
going to be going through in this video because I don't wanna waste any of your time. First of all, we're gonna talk about what to look for when researching a stock to buy, and the different criteria
that I check off my list. After that, we're gonna cover the exact metrics you'll want to monitor when deciding whether to purchase a stock, and it's also important to keep track of these different metrics
going forward because the overall health of a company can and will change over time. So even though you may make a decision early on to buy a stock based on today's information, you have to continue keeping track of these
stocks and this information, you know, over the next couple of years because things do change over time. After that, we're gonna cover how you can start reading stock charts as a complete beginner. It's not gonna be
anything complicated guys, you don't need a finance
background of any kind. Even if you've never looked
at a stock chart before, I'm gonna teach you some of the basics. We're also gonna be covering
the key indicator you can use to easily compare one stock to another, we're gonna cover how to break down complex
documents like the balance sheet, which for a lot of people is, it's just gonna make your eyes spin but I'm gonna just show you
the key numbers that I look for on that balance sheet. We're gonna cover crucial
steps you need to follow when picking stocks for the longterm. And just to be clear here guys, you know, I do a little bit
of short-term trading but for the most part, anytime
I'm buying a stock, it's at least a three to four month hold if not a much longer term hold. So I tend to do a mix of
two styles of investing. One of them is dividend investing, which is my primary strategy. That's like a 10, 15 year investment. So when I buy dividend payers, there are certain ones in my portfolio that I'm gonna hold on to, you know, until my hair is gray. But I also purchase
oftentimes growth stocks, which are gonna be a shorter period hold or I will often try to capitalize on what I see as excessive levels
of pessimism in the market surrounding a given company. And that's exactly what I did
earlier this year with Boeing as well as Lowe's and American Airlines and that JETS ETF. And I'm gonna speak about
all of those different styles of investing throughout this video. And lastly, we're gonna cover the biggest
mistakes to watch out for when picking stocks yourself. Now, that being said, guys, a tremendous amount of research and time went into this video, so I do have a few
quick favors to ask you. First of all, if you
are watching this video on your desktop computer
or laptop and you're have your phone next to you, just go ahead and put
your phone on silence or put it away for a little bit guys. If you sit with me for
the rest of this video, I promise you that I'm gonna answer every
question that you have about researching stocks as a beginner. And you're not gonna have
to jump around and watch like 12 different videos. If you commit to this one
and pay attention guys, you're gonna get everything
you need to know right here. Also, we are covering
a lot of information. So if you have time, pause the video, grab a pen and paper and be ready to take some notes here. And then lastly guys, I do have a few quick disclaimers here. First of all, I am not
a financial advisor, this is not financial advice, and also you should always do your own due diligence and
research above and beyond the information covered in this video before making your own
buy and sell decisions. I'm gonna show you a
number of useful tools that I use altogether when
making decisions about buying and selling stocks, but you don't ever wanna use just like one tool in particular because you kinda have to look at everything. And while I do like Front,
because it's a free tool that gives you a good overall
picture of stocks, make sure you're also doing other research above and beyond that app before making your decisions. However, doing any level of research before investing puts you leaps and bounds
ahead of other people out there who are simply picking stocks based on whatever is being
talked about on social media. So even just by doing any
amount of research guys, you're well ahead of the majority of retail
investors out there. So that being said guys, let's start out here by talking about how to research stocks. And to be honest with
you, there's pretty much two schools of thought when it
comes to researching stocks, and I actually use a combination
of both of these methods. The first one is called
technical stock analysis. And the best way that I've
been explained this is that technical stock analysis tells you the personality of this given company. That's gonna be coming
from looking at charts, patterns, indicators, and this is for shorter term moves. So for example, somebody out there who was a
day trader or a swing trader, they're looking to own stocks for a couple of days at a time or
even just a couple of hours. So they don't care about financial documents, they don't care about the balance sheet, they just look at the charts and they learn the patterns and the personality of that stock, and they look to capitalize on short-term moves within the stock, and based on the stocks personality and based on that trading history. Well, there's another completely
different school of thought called fundamental stock analysis. And this is more of that Warren
Buffet style of investing, where you look at the
fundamentals of a company or as it's been explained to me, the overall financial
health of that company. So technical analysis is
gonna show you the personality and the fundamental
analysis is gonna show you the overall health of this company. Fundamental analysis means
looking at things like company leadership, executive team, key financial documents
like the balance sheet, as well as other tangible numeric indicators
like the P/E ratio. And we're gonna cover a lot of those further along in this video. But it's important to understand that my style of investing involves a blend of both technical or the charts as well as fundamentals or
looking at financial documents and ratios like the balance
sheet and the P/E ratio. And personally, I recommend a blend of
both of these strategies, where you're borrowing some tools from the technical side of things as well as the fundamentals. Now, in the context of this video here, we're gonna mostly focus on
fundamental stock analysis, focusing on, you know, key financial
documents and ratios that I look for in a longterm investment. But we're gonna touch on some technical stock analysis. And I may do a full video in the future on what chart patterns I look for. However, I did do a video recently called when to buy and sell a stock exactly, and that shows you the
exact chart patterns that I look for when purchasing stocks. And not to toot my own horn here, but pretty much every stock
example I used in that video experienced a massive rally shortly after, because typically the same patterns
in the stock market, not always but often
lead to the same outcome. So if you learn these certain patterns, you can look for them, and then by blending that with the underlying fundamental research, you can try to mitigate a lot of that risk and ideally be making more
good decisions than bad ones, which will ultimately hopefully lead to you having returns that exceed the overall market. And again, guys, it's
important to understand that this should be your initial goal here when picking stocks is to make sure that you're adding
value to your portfolio. Because at the end of the day, if you don't wanna do anything, if you don't wanna research stocks, if you just wanna be
very passive about it, you can simply buy and hold index funds such as VOO or the Vanguard 500 Fund, and basically do well when the entire stock market does well. So your number one goal
that you should have when picking stocks is to be able to exceed the return of the S&P 500. Because if your return falls
short of that benchmark, that means that you're putting
time and effort and energy into an activity that's not even making you any money, in fact, it's actually losing you money. And just to be honest with you guys, based on statistics, we know that the majority of professional traders out there do not beat the market, but we do have a huge advantage to being a retail trader, and that is the fact that
we're much more nimble. Because a lot of the
professional stock managers and the mutual fund managers, they have such large amounts of money that they're restricted to certain stocks, and they can't move in and
out of the market as quickly and as easily as us. So we have a key advantage
here of being more nimble and we can move quicker on stocks. So it's not impossible, but that should be your goal. So when you're going
through this whole process just keep that in mind. The goal of individual stock selection is to over time outperform the S&P 500. We know that the majority of people are
unsuccessful with this, but I would also encourage
you to give it a shot as long as you're comfortable
with the risks involved. Because even if you lose
money, I promise you guys, these will be some of the most important learning experiences of your life. All right, that being said guys, enough preamble here, let's jump into the first
research element here, and that is something
called the P/E ratio. So the P/E ratio is one of the most widely used metrics
for evaluating a stock, and it stands for the price to earnings ratio. And a lot of people solely
use this for their evaluation, and it's becoming less and less useful based on something called future growth. Because the P/E ratio is valuable when comparing different companies, but when you're looking at a
lot of these new tech startups that don't necessarily trade based on revenue and earnings, instead they trade based on daily active users or
future growth potential or exciting emerging technologies. So before we get into it, I just wanna say that the P/E ratio is not what it used to be. This was a much more valuable metric, probably like 15 or 20 years ago, kinda prior to the .com
bubble and then shortly after. During the .com bubble it was also not a very useful metric for comparing or for looking at stocks, because so many were trading at very, very high ratios. But that being said guys, what this does is this gives you an idea of how much you are paying per each dollar of company earnings, because it's the price to earnings ratio. So for example, if a company had a P/E of 30 that means you're paying a price of $30 for exposure to $1 of company earnings. And essentially what this is going to tell
you is the earnings multiple that the company trades for. Now, generally speaking, a low P/E ratio compared
to the industry average would mean that that
company is undervalued, and a high P/E ratio means the company is overvalued. But as I said, you can't solely use this
as an indicator because I've had numerous times in the past where I invest in a company solely based on a low P/E ratio, and pretty much every
time guys, I regret it. Because you may look at
that P/E ratio and say, wow, what a good deal. You know, I'm getting this company at 14 times their earnings potential, but what you may not realize is that their earnings are going down year after year. So this is one piece to the puzzle, but it's not everything, but it's the most important
one to start with. So you can use it mostly for comparison. That's the best way to use a P/E ratio. And I'm gonna show you
how to figure this out but what you're going to do is look at the average
price to earnings ratio of a sector or industry, which is just a fancy word
for an area of business. So you have like the financial sector, you have semiconductors,
you have consumer staples, these are just areas of business, and pretty much a based on
that industry or sector, there's gonna be an average P/E ratio, which is pretty much the average earnings multiple that you're paying for that company. So generally speaking, technology companies are gonna trade at a higher P/E ratio based on the fact that there's more growth
potential with that company compared to something
like a utility stock, that's gonna trade at a
lower P/E ratio because there's really not much growth potential expected
with a company like that. So the P/E ratio, the number one thing you're
gonna use that for is comparison using it as a, looking at the benchmark for
the overall sector or industry, and then comparing that P/E
ratio of this specific company, or if you have two companies side-by-side that do pretty much the same thing, you can look at the P/E ratios
between those two companies and figure out which one appears to be cheaper or more expensive. And so that's another thing that people don't understand as well as they look at just the
share price of a company, but the share price actually has no indication of whether or not a stock is cheap or expensive, because companies can issue as many or as few shares as they want to. So you can't look at a stock that's $4 and say, wow, that's cheap, and you can't look at a stock that's 2000 and say, wow, that's expensive, because what you might not realize is that cheap stock has a billion shares, while that expensive stock only has, you know, 50 million shares. It's all relative to, you know, something called the market cap or total value of a company. And I know I might be throwing
a lot at you guys here but trust me, just keep going with the video here, we're gonna cover all
of this and unwrap this one step at a time. And you don't have to learn everything at once here guys, but this is giving you a framework, where you're gonna fill
in the gap over time by continuing to learn about
things like the P/E ratio and then market capitalization, outstanding shares and
different things like that. So just for example, there are guys showing you how this
can be totally different based on the industry or sector. The average P/E ratio for utility stocks is around three. So that means you're paying around $3 for $1 of earnings
annually from that company, that gives you a P/E ratio of three. So that would mean if you were spending $300 on shares of those stocks, you would expect to have
$100 of company earnings through that exposure. And then if you compare
that to technology stocks, the average P/E for tech
stocks is closer to 30 or 40, which is like 10 to 13 times larger than a utility stock. So if you're comparing a utility stock like national grid to a tech stock like AMD, you might look at that
P/E ratio and say, wow, AMD is seriously over-valued and national grid, or this
utility stock is undervalued. That's unfortunately not
a fair assumption to make because it's all based
on the average P/E ratio or the premium that people are willing
to pay on those shares to get exposure to those earnings. So for the time being, understand that the P/E ratio is largely just a comparison tool, and it's a good way to look at two companies doing the same thing and understand, based on just the earnings of the company, which one appears to be cheaper and which one appears
to be more expensive. However, it's not an end all be all, so let's continue to the
second item that we look at. So the second thing that
we're going to consider is basic charting, or what is
the price of the stock doing over a period of time. And again, that's not gonna to be
the focus of this video. There's a lot to technical stock analysis and there's something
called candlestick charts, which can be very useful when conducting technical analysis. However, you can also just understand some basic patterns with line charts and not to, you know, oversimplify it here guys, but sometimes just common sense
is what it requires here. So the best way I can explain this is whatever a stock is doing
previously for like five years, you should expect that trend to continue. It's not a guarantee, but if you look at the last
five years for a stock and it's going down, well, it's probably going
to continue going down. So even if it looks cheap based on something like a P/E ratio, if the five-year trend, it
looks like a sliding hill, then I wouldn't slide down that
hill, I'll put it that way. But if you look at the stock
and over the last five years it's been going up, it's probably gonna continue that, unless something major
changes with the business. So for example, one of the stocks that I
bought a couple of years ago was GE or general electric. Based on the P/E ratio, it seemed like a really good deal and I started buying shares at around 18 bucks a share. Well, little did I know that that stock was not going to do well over the next couple of years, and it continued going
lower and lower and lower. I ended up holding on to that stock for three and a half years. And just last year, I actually finally cut
my losses and sold it. And I think I lost about
five grand on that position, but I had a lot of capital
gains from last year so I decided to just sell that and use that to offset
some of my capital gains. But that's a perfect example of what I'm talking about. If you looked at that chart, the trend was heading the wrong direction, and I got involved with
something called a falling knife. I could do a whole video about that guys, but that's what that's called. So write that down in your notes, and later on, do some more research on a falling knife. And it's one of the most valuable chart patterns that you can learn. And then for an example of
a stock that's done well that I've owned in the past is Apple. If you look at the five-year
trend line for that company, it's heading up. So unless something
major happens with Apple, it's probably going to continue heading in that direction. So what you wanna do is make sure that you're on
the right side of the trend. You don't wanna be looking at a trend line that's going down because I'm telling you guys, it's impossible to call the bottom. I've done this so many times where I'm looking at a stock and I'm saying, wow, this looks cheap, wow, it couldn't go much lower than that and every time, I'm very incorrect about it. So now, I literally will not
let myself touch a stock unless I see six months trend line data of it heading in the other direction. So that's pretty much what I look for. I identify the trend line
over the last five years, and I only invest in companies that are in the overall context of an uptrend or heading upwards. Because the way you make money for the most part in the stock market is buying low and selling high. So you wanna buy shares for 100 and sell them for 120 down the road. If the price is going lower and lower, you don't wanna buy it at 100 and then see it go to
90, 80, 70, 60, because that means you bought way too early and it had much further to fall. Because based on supply and demand, eventually that stock is gonna go into a condition where it truly is oversold, or that means that enough people are looking at this company and they're looking at the P/E ratio, and they're looking at the earnings potential and growth potential and they're saying, wow, you know what people have given up on this company, it's been kicked to the curb and they think it's going out of business or they think they're not gonna do well. Enough buyers start to step up to the plate that the overall emotion
surrounding that stock switches from fear to people wanting
to buy it and people, then the emotion of greed and
people step in and buy shares. And so essentially guys, I know I'm throwing a lot at you here but the stock market is going
to always be swinging from periods of time where a stock is just overly sold off to where the price is
so low that it's like, becomes a good deal to the point where the
price goes up too high to where early investors are saying, whoa, whoa, whoa, like this
is getting out of control, it's going up too fast, I wanna take some profits, and I don't wanna be stuck, you know, not selling it, and then it goes down shortly after. So you're always finding that companies are swinging back and forth between what is called
optimism and pessimism. And a lot of these guys, a lot of these lessons are not coming from my own head. This is just stuff I've read
in books from Benjamin Graham and Warren buffet. So this is not like my own information, like, I made this stuff up. So I wanted to give credit
where credit is due. So the book where a lot of that came from is called the "Intelligent
Investor" by Benjamin Graham, which should be very high on
your list of books to read if you're serious about the stock market. So just for a quick example here guys, this is pretty much the inline pattern or the charting pattern that shows you that a stock is gonna
continue to go down because if it went down over the
last couple of years, it's probably going to
continue going down. So you may think that a stock
is cheap at this level but it could keep going further down before it starts going back up. Because the idea here is that people think because a stock is so cheap, they can get in it for the next
rally when it goes back up. And while that is possible, you never know how far
a stock is going to go in this direction, before that uptrend starts
or the trend reversal. So you don't wanna be banking on the trend reversing in order for it to be
moving in your favor. So if you see a stock chart where it's just going down and down, look up something called
the falling knife and before you buy that, understand what a falling knife is. Something like this chart is what you wanna be looking
for, where the trend is upward over time. Odds are, you know, it doesn't take
an expert to tell you that what happened in the past is probably gonna keep happening in the future. So that's why I like purchasing companies that show a trend like this. However, what you have to be careful for is the potential for a company to go up too quickly and then come back down and return to that trend line. That typically happens sometimes with these market high fliers when they're going up at
an unsustainable rate. So that's why I also use the
P/E ratio and other tools, and I can't, you can't
solely just look at charts and decide what to do with a stock. Every little piece of
this is like a puzzle and it paints an overall picture of what's going on with that company. Now, the next thing I wanna talk about related to charting quickly
is something called support and resistance areas for a stock. And that is pretty much similar to the bumpers in a bowling alley. So if you remember when you were a kid and you'd go bowling and you'd
whip a ball down the alley as fast as possible. And there were times as
a kid, I would try to do it as far left or right as
possible because I liked how the ball would bounce back
and forth through that alley. That's exactly what it's
like with the stock market, is you have support areas
and resistance areas. Support means the floor and resistance means
the ceiling for a stock. And until there's any
major news pushing a stock in one direction to another, you'll find periods of time where a stock continues to trade within a certain price window up and down known as the support and resistance areas. Also, this is referred to
as a consolidation period before a stock is going to
continue the previous move or have a trend reversal. And again, like I said, if you're
looking at companies in the context of an uptrend, what happened in the past is likely to continue
happening in the future. So let me do a quick drawing here and explain to you guys what I mean. So what you see here for example is a stock that has gone
up for a period of time but then it hits this consolidation period where it's just going up and down pretty much at the same
price levels here because this bottom part here is the support where at that point, the price gets so low that new buyers step up to the plate and soak up that supply when other people are selling it off. So up here at the top, people are taking profits and selling it, then the price goes down. But then once it goes down enough, enough people buy it, that it pushes the price back up. And this back and forth
up and down movement or the back and forth of a bowling ball in a bowling alley continues until the support or resistance area is broken. So when you see a chart like this, there's two potential
things that can happen. The first thing that could
happen is the resistance breaks and this is from bad news. And that means that right here, it continues lower, that's bad. Because now it's gonna fall
to a lower support previously. But what you wanna see
happen is the opposite where eventually there's good news
surrounding the company, and it's enough to push it through the previous resistance point and it's gonna go up higher. And the cool thing is typically speaking, the old resistance area becomes the new support or the new floor for that and there's gonna be a higher ceiling. So that's pretty much the basic charting stuff that you have to know. Whatever happened in the past is probably gonna keep
happening in the future. So you look at the five-year
trend line on that price chart and understand support and resistance areas, this pattern here is often
referred to as consolidation, and then that stock is
either going to break support or break resistance. And a perfect example of this right now is what we just saw with Bitcoin, where the price shot up to a new level, but then we were in a period
of consolidation where basically buyers and sellers
were collectively deciding where the stock goes from here. For a while, it was
trading between a certain support and resistance area, but then of course, we got our news about good old Elon Musk and how he put some of
Tesla's cash into Bitcoin, and that positive news was enough to break
the previous resistance and the stock shot up even higher. It's gonna keep going higher until enough people take profits to push it into another
consolidation period. And then this is gonna continue until it moves lower or moves higher. And in a nutshell guys, that's pretty much most of what you have to know about basic charting and
technical stock analysis. And that's pretty much the
only stuff that I look at. I don't get into
candlestick charts anymore. I just look at line charts and honestly I just use common sense. So the third tool in my tool
belt is a recent addition and that is utilizing the
free app called Front. And as I said earlier, Front
has sponsored this video. So thank you to Front for that. However, I just wanna tell you guys that I would not include them in this video if I didn't find this to be a useful tool. I've been working with the team at Front for a couple of months now, and I've learned more about the product and it's something I'm
actually using today when making investment decisions. For the time being, Front is basically like an add on to your existing brokerage account, because one of the issues is free trading apps like Robinhood, while they offer easy trading, they don't offer a lot of
research tools and data. So where Front comes in is they're meant to be a ad-on, which is gonna give you more
information and more context and then you can make better trading decisions. So I wanna show you the app now and how you can easily
get that Fisco score and what that score means
about a given company. So as I had mentioned earlier, that Fisco score is similar
to your credit score or your FICO score, is one of your credit scores. So I would assume that's
where the name came from. It essentially gives
you an overall snapshot of the health of a company. Because your credit score is the combination of things like your utilization, your number of opened accounts, your payment history, and collectively it gives you a score, which is kind of like your
report card when you're a kid. The Fisco score is like the
report card for a company. And it looks at a lot of
different complicated things and spits out a very easy
to understand number. So basically, that number allows you to compare head to head based companies in order to see which one comes in at a higher score. Imagine for a moment you are a bank and you have two people looking for loans on a property. You can look at their credit
score to get an idea of who is in a better position financially to make that purchase. It's kind of similar to the Fisco score. Let's say you were looking to buy a chip company for example, and you were looking at Micron versus Nvidia, you could look at that Fisco score and get a quick little
snapshot of those two companies and see which score comes in higher. Again, the Fisco score alone does not
mean you should go buy this, and that's because no one indicator is ever gonna
tell you every single time, this is the stock to buy. Because if it did, that would be exploited over time and then it would no longer be something that had value because
everyone would be doing it, it would push the price higher, and there would be essentially nothing to gain there because it would already be priced in
at that point in time. So essentially guys, this is just going to give you a snapshot, a nice easy number for comparison sake and another cool tool in your tool belt. So that being said guys, I'm gonna open up the app on my phone now, and if you find it useful
at the end of this video, please use the link down
below to download it just because they are
tracking my clicks and I really enjoy Front and I wanna work with them in the future. So the more clicks and
downloads on that link, the better off it is for me. And just to be honest and
transparent with you guys, there's no affiliates in this video, there's no course, there's
no pitch at the end, it's just straight value. So if you wanna return the favor to me, download Front and drop
a like on this video, that is all I ask and that is very much appreciated
but never expected. Alrighty guys, so here we
are inside of the Front app. You do have to just link it to an existing Gmail or Facebook or just
drop your name and email. It's 100% free. Down the road, they may
offer a paid plan, but right now there's no way for
this app to even cost you money because they're just trying
to provide free value and get more users. So there's nothing that's
gonna cost any money associated with this app. And as you can see right here, there's a lot of interesting
things that you have access to. The first one is the top Fisco values. And the whole point of Front
is that overall Fisco score. So if you're just wondering what stocks have scored the highest and you just wanna do further
research on these companies, that's gonna be right
here for you to view. You can also link your portfolio and get an overall analysis
of your different companies. I will be doing this at some point but unfortunately my brokerage is just not supported right now, but they do offer support for M1 Finance and Robinhood and
Webull and many others but I was unable to link it at the time of making this video, just because the brokerage
I was trying to use wasn't supported but they have thousands of different ones that are supported in the app. It's all through Plaid, so it is secure as well. So you don't have to worry about them having access to your credentials. So we're gonna go to the explore tab here and we're gonna start by looking at some of the companies that
I have owned in the past. So let's start off by looking at AMD or Advanced Micro devices and
see what that Fisco score is. So surprisingly, this one actually came
in at a Fisco score of 504. And if you're wondering, well, what the justification
behind that scoring system, well, this is going to explain it here. Based on the performance of this company, this is considered risky because of the past trading history. Since the stock has gone up
so much in the recent times, it's potentially becoming overvalued. In terms of the news, it's saying that things look good. In terms of the financials, it's fair. In terms of compatibility,
it's exceptional. And this is all based on diversification of your portfolio. So if you link your portfolios, this information is gonna become more valuable and more personalized, and it's gonna give you an idea of if you have too many eggs in one basket and you should be more diversified. It also gives you a
really handy chart up top which benchmarks this
stock against the S&P 500, and this will show you
if it's outperforming or following the index. So if we look at the last three months here, based on the chart, it looks like the stock may
have overheated a little bit. And if we open it up to a one-year chart, I think this is gonna show it better, and maybe even the five-year chart. Yeah, the five-year is not as valuable. If you look at the one-year chart, you can see where this green line went up quite a bit for a period of time, but then it came back to
earth because like I said, if that price accelerates too much, it's gonna have to take a pause and things that go up in a line like that are just not sustainable
over a long period of time. So this comes in at a 504, I don't own AMD anymore. I bought it around 50 and I took profits around
85 or $90 per share. But that was recently over the summer. Initially guys, as crazy as it sounds, I had a thousand shares of AMD back in 2016 at 682 per share. So had I just held onto
those for the long haul, I would have had around a hundred grand. But as they say, hindsight is 2020. So let's look at a couple
of other stocks now just to get more information
from the Fisco score. So for another example, here we're looking at shares of Alphabet or the parent company of Google. This comes in with a Fisco score of 630. And again, when you're looking at this,
just think credit score. A 630 credit score is considered good but of course it could be better. And if you want the
justification behind that, you can see what categories are labeled as good. And then of course we can
see here that Google has, actually for a period was
underperforming the S&P 500 but now it seems like people are getting more and more excited. I believe Google reported strong earnings, and again, that could be something that pushes Google past a previous resistance point and into a further uptrend. So here we have Nvidia, which is coming in at
a Fisco score of 680, which is very good. So again, something that you may wanna
take into consideration when doing your own research. And the reason for that is
based on the past performance, good news surrounding the company, fair financials and that compatibility piece again, is gonna be more valuable based on
actually linking your portfolio and seeing if you could use some exposure
to this particular industry to further diversify yourself. So that's what the app looks like guys, it's really simple. Essentially what you're gonna be doing is conducting research about companies and then checking that Fisco score as one more tool in your tool belt, or you can just go to
the homepage and look at what stocks have the highest Fisco score. And then you may decide based on other research
to buy those stocks. So anyways, guys, that is
the Front app in a nutshell. I'm really excited to see what features they add in the future because this is just the very early
beginning stages of that app, and I have found that Fisco
score to be tremendously useful in my own stock market research. Essentially the performance
is gonna show you how it compares with the
industry average and other stocks over the last three months to give you an indicator of whether or not it's following that trend or it might be getting overvalued based on going up too fast. The news section has AI technology that analyzes overall news sentiment or the general consensus of the news in terms of whether it's positive or negative
surrounding that company. The financials looks at
documents like the balance sheet and income statement, and gives you an idea of the overall profitability and health of that company based on key financial documents. It also looks at the compatibility with your portfolio. If you link it to your brokerage accounts, it will tell you if you're overweight or
underweight in that sector based on your other company positions. So if you would like to check it out guys, there is a link down below if you wanna try out Front yourself. So now we're gonna shift
gears and go back towards fundamental stock
analysis by talking about the balance sheet of a company, which is one of the most useful documents you have available to you to understand the overall
financial health of a company. Now, publicly traded
companies are required to do an earnings report
every single quarter, it's called the quarterly earnings report. And in that report, every single quarter, they're going to update you on
the company's balance sheet, which is essentially going to show you the overall asset load and
debt load of that company, it's gonna show you how
much cash they have on hand and give you an overall idea of the financial health of a company. Because it's just like
your own personal net worth and your own personal finances. If you take on a lot of debt and you have a big house and you drive a brand new car, you're gonna have a higher debt load, and because of that, you may not be in a good position financially because
you have too much debt. Companies can make the same mistakes. They can take on too much debt and then end up in a situation where based on their level of
earnings or level of income, their debt load might be too high. So by looking at this balance sheet, it's kind of like looking at
your own personal income report and looking at your debt load compared to your income or your salary. We're gonna be looking at the salary of a company
or their total revenue compared to the amount of debt that that company has. And we wanna make sure that they have enough assets and they have more money
coming in than they owe, and that they have plenty of assets to cover and pay for those debts. What tends to happen over time, is that a company like
GameStop, for example, it might seem like a good buy based on what everyone's talking about, but one area where you should look is the balance sheet of that GameStop stock, because that paints a
much different picture. Now, trust me guys, I could do a full two hour video just talking about the
balance sheet of a company, and it would probably be overwhelming to a complete beginner. So instead of doing that here, I'm just gonna give you
two things to look at on that balance sheet that I've personally view as the most important. Number one is something called
the debt to equity ratio, which is going to give you an idea of how much money the company has in assets compared to how much debt the company has overall, and this is gonna give
you a general indicator of the asset to debt load of the company. Essentially, this is going to show you whether or not a company
has taken on too much debt. And the formula for calculating it, is you take total company liabilities divided by shareholder equity. And essentially, what
I like to look for here is a debt to equity ratio below two, because if the debt to
equity ratio is above two, that's an indicator that the company is holding on to significant amounts of debt and may have trouble paying it off in the future. So you don't actually have to open the balance sheet of a
company to get this if you want. All you would have to do is
type in the name of the company, followed by debt to equity ratio. So for example, you could type in Apple
debt to equity ratio and Google or some other website
like YCharts, for example, is gonna show you the debt to equity ratio of that company. Or if you wanna have practice
interpreting a balance sheet, you can get this number
off the balance sheet or you could even calculate it yourself if you wanna have a better understanding of where these ratios come from. Now, the next ratio we're
gonna talk about here and the final one on the balance sheet is called the current ratio, and it's important to understand
there's two types of debts in assets that accompany could have. There's current debt, which is debts that are
expected to be repaid in the next 12 months, and then there's long-term debt, which is going to be paid in a time horizon of greater than one year. So long-term debt is actually
one of the things that I try to avoid with companies. I don't like companies that
have a lot of long-term debt, because that typically
just keeps on piling up higher and higher. And just like with your
own personal finances, your debt load can keep
climbing higher and higher as you just keep on borrowing
more and more money. Current assets on the
other hand are assets that are expected to
be converted into cash within the next year. So the current ratio shows you a comparison of the assets expected to be converted
into cash in the next year compared to debts that need to be repaid
in that same timeline, which is going to give you a more closer or short-term view of the financial situation
that company is in. So for example, if you
found out that a company had $2 billion of current liabilities, but only a billion
dollars of current assets, that means that $2 billion of debt is gonna come due and they only have a
billion dollars of assets that are gonna be converted
into cash in the next year. That could show you that
there might be trouble ahead. That is the usefulness of something called the current ratio. Essentially the current
ratio is gonna show you whether or not this
company is likely to have short-term cash problems in the next 12 months. And like I said, this is going to be updated every quarter with that quarterly earnings report. So you're gonna wanna get in the habit of checking these ratios every quarter when that information becomes available. The formula for calculating
this is you take current assets divided by current liabilities, and you want to see a current ratio of around 1.2 to two. So a current ratio of two would mean that this company has $2 of readily convertible assets into cash for every $1 of debt expected to come due
in the next 12 months. If the current ratio is below one, that means they don't
even have enough assets that are gonna be converted into cash to cover the debt that's gonna come
due in the next 12 months, which of course would be a red flag. Again, if this stuff is
interesting and useful to you, you can learn more about the balance sheet and study these ratios yourself or if you just look at the Fisco score, it's gonna give you an
overall score based on the financial health of this company, looking at these metrics and many others. So the next thing on my list here is general public sentiment or what I call PR/press. What are major news outlets
saying about this company? Because there are certain companies out there that end up in this bad
cycle with the press, where no matter what they're doing, they're being watched like a hawk and the press is just constantly writing bad articles
about these companies. One of them for example, is Robinhood. They did get into some
hot water recently with halting trades of some stocks, and that really did rub some
people the wrong way based on them not being honest early on about the reason behind that. So Robinhood for example, is a company that's constantly getting
dragged into the press, meaning there's a general
negative public sentiment surrounding that company. And sentiment is pretty much
just a fancy word for emotion or what general feeling do people have about this company? Because negative sentiment often results in lesser share price, because
people don't like this company if it's constantly being dragged down in the press. So stock prices have a lot to do with human psychology of fear and greed and many other psychological components. The majority of people
out there are making emotional investment decisions but by learning a lot of this, you're gonna be making more of
a research oriented decision, which should give you an advantage to those who are just being emotional. And a good way to stay
on the pulse of a company is understanding the overall sentiment through the news articles. So Front's AI tool actually analyzes the overall
sentiment of news because it can look at an article and based on the
headlines and the article, they can tell if it's a
positive or a negative article. So if you use that Fisco score, that's already factored in. But what I would also
recommend doing is before you buy a company, just go to Google News or
any news outlet that you use, type in the name of the company and just skim through
the last month or two and make sure there's no negative press that could be causing negative sentiment that's gonna translate to an
emotional decision of people possibly deciding to unload shares and seeing that share price fall. So beyond public perception of a company, it's also important to understand what employees at that
company think of it. Because one of the number
one things I like to do is invest in companies where employees love their job, because that's oftentimes
going to translate into that company doing well overall. So I tend to look at lists
out there that show you what companies have the happiest employees, and these companies actually historically tend to outperform others in terms of the share price because it makes sense, the employees at the company are happy. They want their boss to like them and they want the company to do well, so everyone is just, likes the company. One of the things that I learned with my investment in General Electric is I would ask employees of that company, what they thought of the
company and they'd be like, "It's a mess, my boss hates me, I hate my boss. It's so cutthroat. Everyone's out for each other." That's bad corporate culture, and that's gonna cause
all kinds of problems all the way upstream to the share price. So if employees are not
happy at their jobs, trust me guys, don't touch that company
in terms of an investment. So one of the things I like to look at is different lists out
there that show you, you know, on Glassdoor, for example, are employees generally happy or unhappy working for this company? And of course, you don't wanna make an
entire decision based on one review because there's gonna be people
out there that have very good or very bad things to say about any company in general. But if you're seeing a
lot of negative reviews or you're hearing a lot of
people saying the same story, like for me, I knew about five people
who worked through GE and they all shared the same story. And if you yourself worked for GE, let me know if that's the case
in the comment section below, because I've heard that
story over and over again. So the next thing I'm gonna look at when researching a stock is
the quarterly earnings report. And there's also another
report called the annual report which is also equally as important. So as the name suggests, the quarterly earnings report
comes out every single quarter and all publicly traded companies are required to make this information public, that's part of being a public company. Private companies are not required to share this information or be as transparent, because there's not individual investors owning
shares of the company on public markets. So that's one of the delineations there. So oftentimes companies will decide to remain private because they don't wanna publicly share all of this information. So what I recommend doing is taking a quick skim through
the earnings report. You don't have to read everything but there's oftentimes good
commentary there that gives you an idea of the current challenges and successes
that accompany is having. And if you wanna take it a step further, definitely recommend taking a
peek into that annual report. So that quarterly report
is going to include some financial documents, such
as the balance sheet, the income statement, as well as management's
discussion of risks and a few other documents, they're usually about 30 or 40 pages and there's a earnings report, which is oftentimes a
call or a webinar which you can actually jump on as an investor and I would actually recommend that. I typically jump in on like Apple's quarterly earnings reports
and big companies like that, just because I like to know what these big companies are doing and what they're focused on. So no, I don't read every
quarterly earnings report for all the companies I own, but I do jump in and tune
in for ones like Apple, where it's typically
going to be a big deal with a lot of good information. Now, when looking at the earnings report, one of the most important
things that I look at is the quarter over quarter growth that accompany is
experiencing in a certain area. So oftentimes a company is
gonna break up their revenue into different business segments, where they're deriving revenue from and then they're gonna
give you growth numbers based on the quarter previously. So for example, they're gonna compare how much revenue was derived
from this business segment this quarter compared
to the quarter prior. And you typically wanna see double digit quarter over quarter growth in many key areas if this is a growth stock. If it's an income play, you may not really be
seeing much growth at all. But if you're investing in a tech company, you're gonna wanna see continued double digit growth over time, which should translate into more earnings and a higher share price. Another thing you're
gonna wanna do here is look at the actual commentary from the company leaders and
the management team because one of the biggest red flags I've ever come across when investing is dishonest management and it happens. So for example, if you're
reading about a company that may have had some slip ups in the media and they've had some
negative PR sentiment, and then you read the
earnings report and they totally glaze over it or try to make it out to
be something that's not, if you have any inkling or feeling that the
company is being dishonest, run as fast as you can guys. Dishonest management is one of the worst qualities of an
investment that you could make. And I like to also
think of stock ownership as a business partnership, because imagine if you were in
a business partnership where your business partner was dishonest, it makes it impossible to make good decisions because that person's not even
telling you the truth. If the leader of a company is being dishonest, it's like being in business with a dishonest business partner, it's just not going to end well. So that's another thing that I look at in that earnings report. And I also typically will do a
little bit of research on the company's key management team to see where did that company come from or where did that person come from before? Because typically, CEOs bounce around from
company to company, and you wanna understand what track record that individual has, and hopefully it is a positive one. For example with AMD, one of the key reasons that I bought in is because of their CEO, Lisa Su. I had done a lot of research on her. I saw that she had taken
over the helms as leader and I liked her and her track record, and that was one of the main reasons why I bought shares back in 2016. And that's not the only
reason they've done well but it was a good indicator of future success for that company. Alrighty guys, so the final thing on my list here for what I look at when
picking stocks is the moat or competitive advantage
that a company has. And the name for this
comes from the word moat, which is actually a body of water surrounding a property for protection. So you wanna make sure that a
company that you're investing in has things that isolate or protect them from competitors, because there's a lot of companies out there that are involved in a business where they have no real competitive advantage. They might have the
first movers advantage, where they're the first
ones doing something but if the business is sort of commoditized and anyone can do it, well, why would somebody pick
this company over that one? So studying the competitive
advantage that a company has is extremely valuable. And there's a number of things that will factor into the moat of a company. For example, the brand recognition is gonna be part of the moat, technology, patents, resources and talent is a big one as well. For example, we know that a lot of sports
teams have key players. If you have a player with
a very strong track record gets signed with another team, well, that is a good moat
that that team has because you know that there's a
very strong leader there. That could also be factored into the moat, is the talent that accompany has. For example, we know companies like Google are able to attract good
employees and good talent, and oftentimes they're
getting the smartest and brightest individuals, that could be part of the moat itself. So let me give you an example here of a company that I like and a company I've owned in the past that has a massive moat, and that is a company called Boeing. Imagine if I went to the bank and I said, I want to get a loan to start an airplane company. I'm pretty sure the bank would say, "You're an idiot, get out." Because you're not gonna be able
to compete with Boeing. It costs like $50 million to make the cheapest jet that Boeing offers, I'm pretty sure, not to mention, they have thousands of patents and so much is involved with getting approval from the FAA to
actually fly an aircraft. So as a result, there's actually only two main companies
called Boeing and Airbus that make commercial jets, which makes it, so these companies have a massive moat, and it's extremely difficult
for new entrance to come in and steal their lunch. So imagine, if you were trying to compete with Boeing versus competing with Dollar Shave Club. Dollar Shave Club, that's sort of a
commoditized business where anybody could come in there
and offer a razor subscription and cut them out of the middle. So I would view Boeing as a
company with a very large moat based on the cost of entering that business, the research, the technology. And then a company like Dollar Shave Club has almost no moat because any person out there could
probably replicate that company with relative ease. And again guys, the moat that a company has is more important for long-term
ownership of that stock over a two to five plus year period. So if you're doing a short-term trade based on other indicators and you're looking to own that stock for like maybe three or four months, the moat isn't really as important, that's mostly for long-term ownership. So anyways guys, that is the eight things that I look at when researching stocks, and that is how in the past I have picked a couple of winners. Of course, like I said, in the beginning, every investor out there is
gonna have a handful of winners and some losers. The goal here is to have more
winners than you have losers, which means over time, you're making more good
decisions than you are bad ones. And then the other thing
you're gonna wanna do after you following the
strategy for a period of time, benchmark your performance to the S&P 500 and see if you're actually adding value by managing your own portfolio. If you find that you're not, you can always shift strategies and just simply buy into index funds and not get active with your selections and save yourself all of
the time and research. However, I've been doing this for, you know, five, six years
owning different stocks, and this is one of my favorite things. I love researching companies, and there's a social
element to it as well, which is very important to my life. I like talking stocks with people, so you may find that, it's a very enjoyable thing. And I also, I'm very glad to welcome you
to this community as well of being an individual stock owner, 'cause it's really a cool
group to be a part of. The last thing I wanna cover here is mistakes to watch out for. Number one, buying the next hot stock that you hear about from your friend, that's pretty much the situation
we saw here with GME stock. If you wanna know what happens, just go type in GME, we'll put a photo up here on the screen. That's what typically happens with something like that, is you see a chart like that, and I know a handful of
people that have lost like, 70, 80% of their money or more that they put into GameStop because they piled in, they didn't do any research. And something as simple as
just looking at the Fisco score probably would have told you, hey, this is a really, really
bad investment to be making based on these specific reasons. Another thing, not following a consistent
strategy for picking stocks. If you're shooting all over the map and you don't have a real strategy, you can't repeat it. If you have a set strategy
and a set criteria that stocks have to go through before you invest in them, that is something that is repeatable. But if you're just throwing
darts at a wall here, that's just not a repeatable
or scalable strategy. Also, not being clear on your
timeline for an investment and also getting greedy. A lot of people will
make short term trades, they'll make a bunch of money, but they'll keep on holding on trying to make more and more money, and it's very common to
ride a winner into a loser. So if you make a good decision and the stock goes up
and you're thinking man, this is getting a little
bit ahead of itself, one of my favorite things to do is to sell enough to cover
your initial investment and let the profits ride for the rest of your
life if you want them to. Because at that point
you got your money back and you're letting the, you're
playing with house money. That's one of my favorite
things to do as an investor. So that's gonna wrap up this video guys. If you made it to the very end, please leave me a comment down below. I'm always curious how
many people stick around to the end of these marathon videos. Of course, once again, thank you to Front for sponsoring this video here. And again, it's a tool that
I find to be very useful, that's why I'm putting it in front of you. It's completely free, and I think it's going to be another useful tool in your tool belt. If you wanna learn more about it, I'm also going to a link to a review over on my blog that we did talking more about Front. And we also have a step-by-step tutorial over on the investing
simple YouTube channel. I'll put a card up in the
corner for that as well. If you're looking to
check it out yourself, please use the download
link in the description, that way I get credit. Because I think Front is a
really interesting company and I'd love to have them sponsoring future videos. So that would be very
helpful guys and of course, a like on the video is great as well. If you enjoyed this, subscribe, hit that bell for future notifications, happy investing and I hope to see you
guys in the next video.
