We at Bowood Partners love stocks, because they are interesting, cost efficient for the relative return, they have tax advantages and they have the greatest return of any asset class in history.  For five generations, this has been our family's primary investment, and decade after decade we have gained on our investments. I grew up with stocks and I have studied them almost daily for 27 years. The guidelines I have presented here are the general rules I use for choosing an investment, taking a position and executing portfolio changes. If you plan to manage your stocks yourself, I believe You need a plan! You are welcome to use my plan, but if you do not, make a set of rules and stick to them. If you are considering using an investment advisor, make sure you understand his or her rules. These are my rules. This is an outline, there are many subtitles and points in between, but if they make sense to you and you would like to talk more, contact me at 602 799 3887  or information@bowoodpartners.com.

Here are the steps to choosing a stock.

1. Look at the Market, the economy. Buy AHEAD of events, buy on future expectations, not present conditions.

a.       We are looking for slow economic growth.  Fast growth produces inflation, inflation is the most feared ENEMY of economic growth!

b.      Make sure the economy is sporting good fundamentals: increasing corporate earnings, healthier balance sheets, job growth, affordable housing and staples, good trade. Low interest rates.

c.       Avoid geopolitical risk.  Often when the government is involved, economic principals are generally ignored. This makes it difficult to predict. It is wise to stay away from any country with huge issues and industries that are entangled with government in unpredictable ways.

2. Buy the right SECTORS.

a.       Analysis of the business cycle can determine which sectors are next to move and for which the game is over. Stocks move cyclically in groups with their peers.

b.      Sectors to consider:

c.       Remember, Sectors move in cycles. There are many methods for determining the cyclical movement of sectors. We have our own, but it is too involved to review here. Come to our Investor's Symposium for additional instruction. Or our newsletter has a periodic review of buys and sells among sectors.  

3. Chose your Company.  Remember you are becoming an owner when you buy a Stock:
   1. Use your common sense, what is working, what are people doing, what are they buying? What are the trends you see? Determine that you think the market is going up, the economy is healthy. Then pick your sector, then look for ideas in various financial publications and databases and chose your new gem. I recommend you stick with the larger, most well known companies, simply because there is much more information available on them.
   2. Look at the chart. Remember the first rule: Buy low sell high sounds simple enough, but it is easy to get caught chasing a stock. If the stock has already returned what you expect it to this year, it is too late. Do not buy after a swift run up.
   3. Know your ratios and their trends. There are hundreds. Here are what I consider the most important ones.  

4. Compare your company to it's peer competitors. Buy the best in class as Kramer would say. Check out the management and consolidated notes to the financial statements. Set your buy range, target price. Be ready for fluctuation. 10% move is normal.  If stock falls 30% you must sell or buy more. If the fundamentals change, cut your losses or take your gain. Check your stock at least weekly.