How I Find Winning Stocks (Analysis For Active Traders)

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April 21, 2021

Video Summary

Jake, a self-proclaimed value investor, shares his approach to finding new stocks to invest in. He emphasizes the importance of understanding fundamental analysis, technical analysis, and qualitative analysis. He warns against following popular “hyped” stocks pushed by other finance YouTubers, citing numerous examples of disappointing performances.

To evaluate a stock, he focuses on the following key factors:

1. Revenue growth: Is the company’s revenue increasing year-over-year?
2. Profitability: Is the company profitable, and are its profits increasing?
3. Share buybacks: Is the company reducing the number of outstanding shares, thereby increasing earnings per share?
4. Valuation: Is the company’s price-to-earnings (P/E) ratio low compared to its historical and industry averages?
5. Free cash flow: Is the company generating more cash than it is spending, and is its price-to-free cash flow (P/FCF) ratio low compared to its peers?

He also emphasizes the importance of technical analysis, looking at charts to identify trends, support, and resistance lines. He notes that most stocks have predictable patterns and that timing is crucial.

To find new stocks, he uses a unique approach: buying fractional shares of hundreds of companies, allowing him to monitor their performance daily. He uses online tools, such as macrotrends.net, to research companies, focusing on their financials, earnings reports, and technical analysis.

In the video, he shares two examples: PPG Industries and Sherman Williams. He evaluates both companies, discussing their revenue growth, profitability, share buybacks, valuation, and free cash flow. While he is not impressed with PPG’s fundamentals, he likes Sherman Williams’ technicals and fundamentals, finding it a promising buy opportunity.

Jake’s investment strategy involves buying call contracts on established, reputable, and predictable companies, aiming to generate returns through market volatility. He believes that his approach is risk-averse and more likely to lead to success than investing in hyped, unproven, or speculative stocks.