Just One Man's Opinion - 02 July 2005

by JMac

What ARE "Fundamentals ?" (for the average Joe & Jane)

I must confess that in almost 40 years of on again off again investing ( I was totally out of the market through much of the 70's) I have read fewer than a dozen company annual reports. I am skeptical by nature and find them boring and full of "puffery".

If I become interested in a stock I use the S& P Report, Moody's and ValueLine.

I look for the following in no particular order:

Do I understand the product or service? (this has made me miss many biotech and tech plays)

Is it a market leader? e.g. Anheuser, Altria, WeightWatchers

I like brand recogniton , e.g.Coke, P&G, Marlboro (Altria) , J & J, McDonalds

Do the cooks eat their own broth? How much do insiders own ? This is very important for start ups.

What is its P/E relative to its sector?

Dividends- this is not just an income question. If a company consistently pays dividends it is probably healthy, e.g. J & J has paid dividends for 87 years, (but I do love the 15% tax rate too)

Book value ?

Five year profit margin on sales ?

Who are its competitors?

Management- e.g. I like Viacom, but who succeeds Redstone ? Disney- boys, boys, play nice !

Extrinsic factors- war, peace, elections, oil prices, Fed policy, litigation, labor problems, e.g. GM & airlines.

I used all these factors to buy a small positon in Roper Industries a few years back, apparently Maytag agreed with my assessment and bought them (and me) out at a nice little premium in just six months. I DID NOT buy on a takeover bet, I have never liked that play, it was pure luck that someone else saw what I saw, or was it ?

ALL this info is out there and it is FREE!!!!!!!!!!