I take a considerable amount of time to perform a thorough quantitative and qualitative evaluation for any stock or the company. I believe it is necessary since I am investing for long haul. How does a one month or two month matter when I am attempting to visualize for next 10 years or more. Yes, I agree delaying couple of months will make me miss the window of opportunity or as the stock investing lingo says, missing the multi-bagger.
I screen out many companies before I decide to spend long hours looking into its numbers and future direction. I keep my screening process very simple. The parameters I use for screening are as follows
Operating cash flow: A consistently positive and growing operational cash flow shows the strength of its products and demand in market place. In addition, to a certain extent, it also demonstrates management’s ability to manage the generated cash.
There are many different styles, approach, and methods of investing. Many individual investors focus on trading (swing, positional, momentum, speculation, technicals etc.), while many others focus of investing (value, growth, blend, etc), and still many others on special situations (opportunistic, arbitrages, etc). In addition, there are quite a few individual investors that attempt at combination of trading and investing. Similar to glass being half full or half empty, I believe every style has its own pros and cons’ depending upon in what context one is looking at it. Individuals have to figure out what works best for them.
Any long term investor will know that they need to manage risk in their portfolio. The way individuals should manage their risk is asset allocation and diversification. Today, I am discussing how I manage risk in our income portfolio. The objective of this risk analysis is to make sure that TIP portfolio is not exposed to any particular event, or company, or any other aspect that will affect portfolio performance. 
In my stock analysis process, among others, one of the methods I use to estimate fair value of a given stock is using 15 year discounted cash flow (DCF). At a fundamental level, what DCF does is, it uses future cash flow estimates and then discounts it to determine the present value. Let us discuss both of these parameters. 
You can’t spend profits! Can you?
A statement that you can’t spend profits, might surprise you! Individuals might think that this is a very odd statement and perhaps incorrect. It is a correct statement and should be made as an investing proverb to be used by any type of investor. Let me present my case.
Companies make profit by selling or exchange of their products or services. At a very basic fundamental level, this can be done by making those products or services at lower associated cost (or expenses). In the end, what we all want is to somehow convert those profits into cash so that we can spend it. Some might argue that this is just semantics of words. I say, it is not! If that were the case than how can we explain the fact that many times companies report profits that are more than cash flow from operations? Take a pause and think for a moment. How can we have more profit when we are not getting that much of cash transactions? In one of my earlier post Cash Flow is Important Financial Statement, I discussed how cash flow is what ultimately drives the value of any given business. Continue reading rest of this article…