Do you use the Stock Comparison Guide after the Stock Selection Guide? You have completed the Stock Selection Guide and you think you have a good company, it looks OK, but now what. A famous person once said, “It is hard to choose the best company among one”. So, we want to look at several good companies in the same industry and choose the best of the best. The best buy with potential growth is not always the biggest, most popular company.
The Stock Selection Guides and the Stock Comparison Guide give the individual investor a manageable way to look at these companies without having a two-inch stack of papers and reports to sift through. Many people mistake the Stock Selection Guide calculations for a complete stock study. It is a complete study on an individual company but how can you tell if it is the best company in that industry? The Stock Comparison Guide helps you find the best one.
For instance, you are out to dinner, you look at the menu and several things look good. But, you can’t decide which one you want. Wouldn’t it be nice if you could have two or three to sample and taste? Then you could choose which one tastes best – and buy it – after you have compared the flavors.
This is what the Stock Comparison Guide does. It lets you sample the flavor of several companies so you can decide which one “tastes” better. The Stock Selection Guide gives you a two-page “portrait” of the individual company. The Stock Comparison Guide uses those pages from each of those companies and condenses up to five companies down to one page. The important items are listed side-by-side. It makes it easy to compare about 30 items without having to sift through a lot of papers. CommentsComment on this Page Last Modified 2005-05-12 |
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May 16, 2005
The current "approved" stock comparision guide does not take into consideration a number of important judgments made during the SSG process. For example, who cares what the five year high price has been if it includes the go-go years of excessive P/E ratios? Who cares what the P/E ratios have been if they do not include the judgments you have made in your SSG? I think the judgments you have made are important.
The stock comparision guide looks at the zoning. It ignores the fact that the 1/3,1/3, 1/3 zoning will always produce an US/DS ratio of 2 to 1 for the highest price in the lower zone. It is much better to use a 1/4, 1/2, 1/4 zoning as the highest price in the lower zone will always be an US/DS ratio of 3 to 1. It avoids the basic error of referring to the lower zone as the "buy zone". It can't be if the US/DS ratio is not 3 to 1.
There are a number of other improvements that can be made to the stock comparision guide if one puts their thinking cap on. I have developed an Excel spread sheet that incorporates what I believe are the needed reforms. It is available to anyone who wants it sent to them.
Ralph Seger