Minimize Risk

I am a value investor so that means: …much of this info is also in Let Buffett be you Guide

  • I try to keep every investment less than 5% of your portfolio and spread across sectors.
    • Stock selections should be across a spectrum of sectors to maintain diversification. This is a challenge for me as one other consideration is to only buy what you know… and what I know is limited.
    • This means you will have a 20+ universe of stocks. It can be a challenge tracking more than say 30+ stocks.
  • I look for large cap stocks with a “moat” around them - competetive advantage
  • find one with a P/E of less than 15 (which is the market average over time) and I look for a forward P/E that is lower than the current P/E - suggests improving earnings.
  • I buy stocks with a dividend - these are generally stocks that have been around for a while and I want one I expect to be around 10 years from now. I prefer a dividend yield over 1.50.
  • It should be a market leader - again look at the market cap compared to others in the same sector.
  • Return on Equite (ROE) of over 10%/yr.
  • Is this stock “suitable”? Is it in my risk tolerance boundries and am I confortable with management, product, location etc
  • Speaking of management - I look for companies I trust - this is a challenge and it is important