Purchase Discipline
Analysts focus on ideas that have limited downside risk and the opportunity to generate earnings/cash flows that are higher than what the current stock price implies.
Companies are closely monitored and factors considered in analyzing securities include:
- Improving ROE (return on equity)
- A declining debt/equity ratio
- Positive cash flow
- Expanding margins
- Public market less than current private market comps
- Positive earnings surprise without a corresponding increase in Wall Street earnings estimates
Sell Discipline
Companies are reviewed for sale when:
- Stock achieves final price objective
- Fundamental change in company or industry that negatively impacts original investment thesis
- Stock declines 20% over last 30 days
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