Complete Guide To Create a Winning Stocks Portfolio To Achieve Your Financial Goals.

Table of Contents:

1. Preface

2. What to Expect Out of This Guide?

3. Complete Guide To Create a Winning Stocks Portfolio To Achieve Your Financial Goals.

   1. Develop Good Financial Foundation & Habits

   2. Identify Your Goals

   3. Understand these

   4. Build a Stocks Watchlist

   5. Begin Your Analysis On The Stocks'

      1. Valuation

      2. Growth

      3. Fundamentals

         1. Product Reception

         2. Financials

         3. Management & Culture

         4. Competitive Analysis

      4. Dislikes & Risks/ Threats to Watch Out For

      5. Bonuses & Favourable Traits to Look For

   6. Allocating Weightage For The Stocks

   7. Monitor

   8. Rebalance Periodically

4. Additional Readings

   1. Real-World Investment Examples

   2. Practical Investment Tips & Insights

Disclaimer: This communication is provided for information purposes only and is not intended as a recommendation or a solicitation to buy, sell or hold any investment product. Readers are solely responsible for their own investment decisions.

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Preface

This guide is the compilation of the checklists, processes and tools I have used to build an investment portfolio that consistently generated above-average returns over time.

While countless guides and books claim to offer the secret to building a winning stock portfolio, many fall short in key areas:

1. Lack of Transparency Authors often withhold their own returns/ performance, making it difficult to gauge the effectiveness of their strategies.
   

2. Information Gap Crucial details, like where & how to access essential information for analysis, are frequently missing, leaving readers without practical guidance, only theoretical information.
   

3. Goal-less Approach Failing to emphasize the importance of starting with clear financial goals leaves readers without a personalized roadmap for success.
   

4. Jargon Overload Complex language and technical jargon can alienate new investors and hinder understanding.
   

This series of microblogs aims to bridge these gaps and empower you to build a portfolio that aligns with your individual aspirations. Here's what sets it apart:

1. Transparency I openly share my long-term portfolio performance, allowing you to learn from someone with demonstrably successful strategies.
   

2. Actionable Insights Each microblog provides clear examples and free online tools to help you apply the concepts to real-world stock analysis.
   

3. Goal-Oriented Framework We begin by establishing your financial goals, then work back to build a tailored investment plan.
   

4. Clear Communication I prioritize simple, jargon-free explanations to ensure readers can grasp the key concepts.
   

What to Expect Out of This Guide?

You will learn how to set your financial goals, understand valuation, various criteria for stock analysis, discover helpful free tools, and discover stocks with high growth potentials while mitigating the downside risks of your portfolio.

Remember, this series empowers you to make informed decisions based on your unique financial journey. Feel free to adapt these strategies to your specific needs and you'll gain the knowledge and confidence to navigate the investment landscape and achieve your financial goals.

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Complete guide to create a winning stocks portfolio to achieve your financial goals:

1. Develop Good Financial Foundation & Habits

1. Pay off existing high-interest (ie Credit Card) debts.

2. Build an Emergency Fund that will last you for 3 to 6 months.

3. Have a Budget that empowers you to Save & Invest More,
   

2. Identify Your Goals 🥅

1. Amount you need to reach your financial goals

2. Amount you need to invest every month

   1. Targetted returns you should aim for every year to achieve your goals 🎯

      1. (note): if it is less than 10%, consider the path of Passive Investing (invest in S&P500).

   2. The number of years you need to do this for.

3. The number of stocks you should have in your portfolio. 

4. The right broker to use: use one which offers Fractional Shares.

   
   

3. Understand this 💭

1. The importance of:

   1. Staying Invested: "Time in the market beats timing the market"

   2. Analysing Companies' Past Financial Performances

   3. Valuation 

      1. Price to Sale (P/S) & Price to Earnings (P/E) ratio

   4. Assessing the Effectiveness of a Company’s Marketing Funnel.

   
   

4. Build a Stocks Watchlist 📋

1. Start with Identifying Fast Growing Industries with High Barriers of Entry.

   1. Identify Companies with Great Customer Reviews.

2. Build Your Stocks Watchlist using an Investment Checklist Tool (https://icet.club/)

5. Begin Your Analysis On The Stocks'

1. Analyse the collated companies using the Elimination Method (A Swift and Risk-Averse Approach).
   

a. VALUATION 🔢

1. Avoid Stocks with a Price to Sale ratio of >18x.

2. Favour stocks which PE ratio is below its 5 years' average, and also growing in Net Income and Profit Margin.
   

b. GROWTH 📈

1. Favour companies which:

   1. Revenue Guidance/ Outlook figures are higher than your targetted rate of returns.

      1. otherwise, look for signs of Shares Buyback.

   2. are operating in Fast Growing Industries (with High Barriers of Entry).
      

c. FUNDAMENTALS

i. Production Reception ⭐️

1. Company's Product Ratings & Customer Reviews should be good.

   1. Company should have positive Google Reviews

   2. Company's Mobile App ratings should be positive.

2. Google Search Trends for the Company and its Products should be healthy.

3. Company's organic web traffic trend should be increasing.
   

ii. Financials 💰

1. Company should be in a Net Cash position, otherwise

   1. their Net Debt to Equity should be < 50%

   2. their Interest Coverage Ratio should be >5X,

   3. their Quick Ratio should be >1, and

   4. their Current Ratio should be > 1 (preferably 1.5).

2. Company should have Positive Shareholder Equity, otherwise

   1. Check if it is due to high Share Repurchase program? Fortinet's case study.

3. Company should have Positive Cash Flows (Operating & Free Cash Flows)

4. Company should have strong Revenue trends.

   1. Great if the company's Revenue growth has been exceeding Industry's growth rate.

5. Company should have healthy and increasing Profitability Ratios (Gross, Operating & Profit Margins, ROIC, ROE)

   1. Great if the company's Net Income Growth has been exceeding your targetted Rate of Return.

6. Company should have healthy (& preferably increasing) amount of Cash & Cash Equivalent figures.

7. Company should have Increasing International Sales Growth.
   

iii. Management & Culture 👨🏻

1. Preferable if the Founder or C-Suite Execs own a High amount of the stock.

2. Preferable if the Founder or CEO is Young.

3. Aim to avoid if the Founders & C-Suite Execs are aggressively selling their stock of the company.

4. Good if the CEO's Compensation Is Mostly in Stocks Rather Than Salary.

5. Important that the Company Does Not Have a Poor Glassdoor Rating.

6. Important that the Company is led by a Solid Management Team

   1. led by Founders or CEO with Successful Track Records, Relevant Experiences and Good Ratings from Employees.

   2. led by Founders or CEO who are Passionate.

7. Preferable if the Company Has Healthy & Increasing R&D expenses.

8. Important that the Company Has An Innovative Culture

   1. Is the company an Enabler or Adopter of Innovation? (Think Microsoft)

9. Company should Not Be Laying Off Employees In A Ruthless Manner.

10. Company's existing & hiring Employees Mix should be complementary with its growth plans.

11. Great if the Company's Mission meets the NAMI checklist (Noble, Ambitious, Meaningful, Inspiring.)
    

iv. Competitive Analysis

1. Company should have some form of Economic Moats 🏰

   1. Switching Cost

   2. Network Effects

   3. Intangible Assets (ie Strong Brand, Patents)

   4. Low Cost of Production

   5. Efficient Scale

2. Preferably if the Barriers of Entry for the Industry is High.

3. Preferably if the Company has increasing Social Media Followers & healthy engagement rates.

4. Company should have High Customer Lifetime Value (CLV).

5. Company should be within your Circle of Competence.

d. Dislikes & Risks/Threats to Watch Out For 🙅🏻

Continue to evaluate the company using the Elimination Method with these checklists below.

1. Company's Products' User Counts & Usage Statistics (where applicable) should not be in a decreasing trend.

2. Company ought not to be facing too high of Antitrust Threats.

3. Company's Short Interest Ratio should not exceed 10.

4. Company should not face High Customer Concentraion Risks.

5. Company's expansion to new Business Segments should be Profitable (or showing signs of achieving it).

6. Company should have minimum Key-man risk (blog is a work in progress 🛠️).

7. Company's products and services should have minimal risks of being displaced by AI/ Robotics & other major technological trends. (blog is a work in progress 🛠️).

8. Company's Guidance figures in the past should not be unreliable. (blog is a work in progress 🛠️).

9. Company's products and services should have minimal Cyclical Risks. (blog is a work in progress 🛠️).

e. Bonuses & Favourable Traits to Look For 👍🏻

Caveat: the Fundamentals of the company should be ascertained to be strong for the bonuses below to be considered.

1. Company is Founder-led.

2. Company has a strong Ecosystem of Products.

3. (For SAAS Companies): Company meets the Rule of 40 (R40).

4. Company's is Repurchasing Stocks (Decreasing Shares Outstanding & Increasing Earnings Per Share (EPS).)

5. The Stock is Listed for Less than 10 years.

6. Company's Revenue Growth since IPO has been higher than Stock Price Growth (blog is a work in progress 🛠️).

7. Company is achieving these Milestones which can result in Stock Price Surges

   1. Milestone 1) Achieving the First Billion-Dollar Revenue

   2. Milestone 2) Becoming Profitable After Years of Losses

   3. Milestone 3) Achieving the First Billion-Dollar Income

   4. Milestone 4) Achieving a $1 Trillion Market Cap

   5. Milestone 5) Bonus: Achieving 1 Billion Users

8. Company owns a healthy Market Share (blog is a work in progress 🛠️).

9. Company's Products & Services are showing signs of Organic Demand or reaching Operating Leverage.

10. Company's Products & Services are used by Big-Name / High-Profile Customers (more applicable for B2B) (blog is a work in progress 🛠️).

11. If the Company is operating on an "Asset-light" business model.

12. If the Company operates on a B2B Business Model, it will be great if they have a Diverse Group of Customers (in both Company Size & Operating Industry).

13. Company has minimal analysts coverage (<10 analysts).
    

6. Allocating Weightage For The Stocks 💯

After scanning through the Valuation, Growth & Fundamentals above:

1. Fill in the list of the shortlisted companies on the Portfolio Allocation GRID to help decide the allocation weightage for each companies.

2. Use the Downside Mitigation Calculator (template) and keep the max drawdown risks to be -10%. (blog is a work in progress 🛠️).
   

7. Monitor 👀

1. Every Quarter:

   1. Check the Financial performances & Guidances in the Quarterly Earnings Reports

2. Every 6 months:

   1. Revisit the Fundamentals of the companies (refer to the checklists above)

3. Be sure to:

   1. update the stocks' Fundamentals score on an Investment Checklist Tool

   2. update the stocks' attractiveness ranking on the GRID
      

8. Rebalance Periodically ⚖️

• Rebalance periodically with this Decision Tree when the:

  1. stocks in your portfolio become overvalued

  2. the stocks' fundamentals have deteriorated

  3. the stocks' value have exceeded than their allocated weightage.
     

Additional Readings 📚

1. Real-World Investment Examples

   1. AXON Stock Report – A Comprehensive Analysis

   2. A Case Study on Spotify: How to Use Industry Growth Rates to Estimate a Stock's Growth Potential

   3. Analysing Netflix's Profitability, Intrinsic Value and Market Position.

   4. Microsoft: an ENABLER & ADOPTER of Innovation.

   5. on Apple (AAPL):

      1. 2 Reasons Why Apple Has No Competition In The Marketplace.

      2. 2 of Apple's Economic MOAT.

      3. Apple's Catalysts for Future Growth In The Next Decade & Key Risks.

      4. Apple’s Products Revenue in past 25 years & How are Vision Pro's Sales Expected to Contribute to Apple's Total Growth.

      5. Apple: Hardware with Recurring Revenue Potential

   6. Why I'm adding Hubspot stock into my portfolio (It is the best in class in the CRM space).

   7. What I like & dislike about Servicenow stock (NYSE: NOW)

   8. Companies' stock CAGR returns since releasing revolutionary products.

2. Practical Investment Tips & Insights 🤔

   1. How much should you invest and what returns should you aim for so you can retire comfortably?

   2. How to identify companies you can hold for the long-term (at least 10-20 years) in your portfolio?

   3. No dividends? Company is still growing? No problem.

   4. How much returns will you get when buying stocks that have fallen from their all-time high prices?

   5. What were the PS ratio of popular stocks at the peak of the Dot-com bubble?

   6. Why stocks' valuation should never be compromised (Lessons from 2020-21 bull run).

   7. Don't Be Fooled by the Hollywood Hustle: Why Steady Wins the Race in Investing

✅ Invest with Confidence, create your own Checklists in IceT.club