Everything matters. Investment considerations include but are not limited to: the type of business; its product/service market, TAM (total available market), geopolitical issues (i.e. tariffs), business model (how does the company make money), competition; regulatory factors, balance sheet, capital structure, and management team (always bet on the jockey not the horse – think Steve Jobs, Jeff Bezos).
After all of these factors are assessed, consider all valuation factors: absolute and relative valuation, now and historically across the public life of the company, operating metrics, and financial ratios. If these check out, now you have your investment in your sights. But don’t pull the trigger yet. Continue to stalk your investment.
Consider other qualitative factors such as the management team’s propensity to conduct active investment community visibility activities (critical for a microcap security), an increase/decrease in sponsorship in the name, insider buying, interest or lack thereof now or later for sell side research coverage. Ensure that the company is not going to do a financing in the near future (which will dilute your position and drag the equity down fairly immediately).
Continue reading the news for a while. Study the overall markets’ behavior compared to the behavior of the security you are stalking. Consider measuring the stock’s correlation coefficient to the indices. Watch the price, volume and price behavior closely. Remember: Volume is the fuel of price. Sentiment is the fuel of volume. Calculate your return-risk profile. Consider all aspects of applicable technical analysis (e.g. exponential moving averages—select your durations, stochastics, Bollinger Bands); When all of the fundamental, quantitative, qualitative, technical, correlation and return-risk profile questions and considerations are answered to your satisfaction and comfort, and there are no surprises since completing your research and stalking process, take the shot! Invest. Hunt, don’t gather.
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~David N. Baker
Mach 100 LP
6565 Spencer St., Suite 205
Las Vegas NV 89119