Value Investing Portfolio Criteria

I am about to start a new portfolio for myself.  I want this to be a broad portfolio of stocks that I can hold on to for some time.  And, along with many of the other holdings I keep, I am going to use purely Value Investing techniques to find the stocks I am looking for.  Now, more than ever, it is going to be incredibly important to make the best stock picks you can.  Up until now, up until the past couple of years where the Federal Reserve has pumped the economy to maximum, picking stocks was a matter of merely going with the flow.  Those days are over.  And, working within a purely value investing criteria may very well be the absolute best strategy moving forward.

There is far too much inflation.  And, the Federal Reserve is shifting gears.  Whereas, up until just a couple of weeks ago, the Fed was air-dropping barrels of lighter fluid onto the economy, now they are showing up with water trucks in order to put out the flames.  For the record: I believe the Federal Reserve is behind the curve with where they should have been.  Easily, they could have started raising interest rates over a year ago.

The Economy & Value Investing

I have made it clear that I believe the US economy is about to slow down significantly.  The US consumer is being taxed too much from inflation.  And, the Fed just raised interest rates which will add to the payments that consumers will be making on their credit cards for purchases they have already made.  That will affect future economic growth.

And, higher interest rates will affect borrowing costs for auto loans & mortgages which, that will also have a dampening effect on economic activity as individuals will have to downsize their purchases for a new car or new home being built.  These little moves will have ripple effects throughout the economy.

Give that, I am not in a huge rush to make any stock picks.  Instead, I am looking to line up stocks.  And, I am also going to be focusing on economic indicators as to when to pull the trigger.  I will want to see the health of the US consumer start to pick up again.  And, I want to see expenditures increase as one of the most important variables in timing these acquisitions.

I will be continually updating my content with which stocks I am going to pick and when I feel the economy is on the mend enough to pick up and start moving.

Criteria for Value Investing stock picks

Along with the economy, there are criteria that I am going to be adhering to to pick my stocks.  The criteria is simple, really.  And, when you lay it out you see what it takes to pick winning stocks.

First, I will establish a baseline performance level for comparison.  And, I have about 20 different ratios that I like to look at when I evaluate any one stock.  These ratios will allow me the ability to measure up any stock to all others.  Here are baseline measurements I want to establish for comparison:

• Increasing Revenue Quarter after quarter;
• Revenue increase in top 1% versus all other in sector;
• Gross Margins in top 1% versus all others within sector;
• Operating Efficiencies in top 1% versus all others;
• Revenue Per Share in top 1% versus all others;
• Price/Earnings or Dividend Yield in Top 1% versus all others;
• High Capital Turnover Rate; and,
• High Return on Capital.

These are the things I will be looking at.  I am going to look at individual sectors first and try and find any one stock that fits into the top areas of these categories.  If you have a high performing company that is checking mostly all of the boxes above, is competitive against other companies, and has a market monopoly of sorts where pricing is not an issue, then likely you could have a stock that will perform well over time.

I will also be starting by looking at each sector within the S&P 500 and finding the baseline comparison for each metric above.  That is the starting point.  Then, I will be looking for any stocks that outperform these baseline metrics while also being undervalued; no short task.

The timing is ideal

Over the next several months there will be a lot more upheaval in the stock market.  Many will be getting out of positions and, that selling is very likely to push through with excellent companies finding their stock prices at reduced rates.

I will not be looking at “high-flying” stocks, or sorts.  I want stocks that are below market value, below the averages.  But, that is the art of picking stocks.  A value investor will need to sort through all of the various stocks to find a particular gem in the rough.

I am looking for more selling in the stock market all through the remaining part of this summer as the results from Q2 start showing up in company financials.  These results are very likely to show dismal returns from revenue growth; and, by extension, profitability, as the consumer will have heavily entrenched themself from 40-year high inflation rates.

Weekly Continuous Updates

Look for me to continually update this line of thinking as I move forward.  This is going to be a major part of what I do over the next several months, quarters, if not a few years.

I am going to start on the tech sector to begin with as that always has some higher-performing companies.  But, keep in mind that I am likely to shun the overly popular stocks simply because upside potential will be limited.

Also, I will absolutely be working on my cannabis stocks and updating that material.  I will be looking to do at least 4 companies per week along with 2 videos per week on my YouTube channel so, there will be plenty to work with.

And, I will especially be working on my Markets & Economic Indicators content continuously… now more than ever as we are seeing so much upheaval… and opportunity.