<ul><li>Sunday  May 25 th  2000 </li></ul>GEN-X INVE$TOR$
A Proven Investment Philosophy <ul><ul><li>Principle 1 : Invest Regularly, Regardless of the Market Outlook </li></ul></ul...
Setting Investment Goals <ul><li>Attain average growth in prices and dividend income of 14.9% compounded annually  </li></...
Growth <ul><li>Comes in a number of ways </li></ul><ul><ul><li>Industry is new and has a new market to satisfy </li></ul><...
Portfolio <ul><li>Diversify to reduce risk – 8 to 12 stocks first year </li></ul><ul><ul><li>Increase ownership of the bes...
Key Factors in Investment Analysis <ul><li>No stock will be purchased without advance analysis </li></ul><ul><li>Analyze e...
Three Tests of Management <ul><li>Rate of growth </li></ul><ul><ul><ul><li>sales have increased at least at the expected r...
Three Tests for Reasonableness of Share Price <ul><li>Earnings per share </li></ul><ul><ul><li>Should grow on a per-share ...
Two Methods of Stock Selection <ul><li>Fundamental Procedure </li></ul><ul><ul><li>Study the company, its industry, and it...
Finding Companies to Study <ul><li>Business Publications </li></ul><ul><ul><li>Wall Street Journal, Business Week, Fortune...
NAIC Low-Cost Investment Plan <ul><li>Enables us to reinvest earnings and additional funds in additional partial shares of...
Annual Reports <ul><li>Public relations document also including full financial disclosures </li></ul><ul><li>President’s “...
Annual Reports - The Balance Sheet <ul><li>Depicts a company’s solvency or financial position at a specific date </li></ul...
Balance Sheet Terminology <ul><li>See Chapter 3 of the NAIC Official Guide –”Starting and Running a Profitable Investment ...
Analyzing the Balance Sheet <ul><li>See Chapter 4 of the NAIC Official Guide –”Starting and Running a Profitable Investmen...
Annual Reports – The Income Statement <ul><li>Also called a  profit and loss statement </li></ul><ul><li>Reports income, c...
Income Sheet Terminology <ul><li>See Chapter 5 of the NAIC Official Guide –”Starting and Running a Profitable Investment C...
Analyzing the Income Statement <ul><li>See Chapter 5 of the NAIC Official Guide –”Starting and Running a Profitable Invest...
Tools for Smart Investing <ul><li>Stock Check List </li></ul><ul><li>Stock Selection Guide and Report (SSG) </li></ul><ul>...
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Gen-X Investors

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Gen-X Investors

  1. 1. <ul><li>Sunday May 25 th 2000 </li></ul>GEN-X INVE$TOR$
  2. 2. A Proven Investment Philosophy <ul><ul><li>Principle 1 : Invest Regularly, Regardless of the Market Outlook </li></ul></ul><ul><ul><li>Principle 2 : Reinvest All Earnings </li></ul></ul><ul><ul><li>Principle 3 : Invest in Growth Companies </li></ul></ul><ul><ul><ul><li>- earnings per share and sales are growing at a rate higher than that of the economy as a whole </li></ul></ul></ul><ul><ul><li>Principle 4 : Diversify to Reduce Risk </li></ul></ul>
  3. 3. Setting Investment Goals <ul><li>Attain average growth in prices and dividend income of 14.9% compounded annually </li></ul><ul><ul><li>Double value of holdings every five years </li></ul></ul><ul><li>Realize a 4 to 6 percent yield over time </li></ul><ul><li>on investment from dividend income </li></ul><ul><li>Plan to stay a member until retirement years </li></ul><ul><ul><li>15 year club in which each member pays in $20 per month should reach a worth of $22,190 in five years </li></ul></ul>
  4. 4. Growth <ul><li>Comes in a number of ways </li></ul><ul><ul><li>Industry is new and has a new market to satisfy </li></ul></ul><ul><ul><li>New product, material, or service </li></ul></ul><ul><ul><li>Produced by vigorous, talented, driven management </li></ul></ul>
  5. 5. Portfolio <ul><li>Diversify to reduce risk – 8 to 12 stocks first year </li></ul><ul><ul><li>Increase ownership of the best performers and substitute better stocks for the poor performers </li></ul></ul><ul><ul><li>Concerned not in how many or how few stocks we own, but that each meets our qualifications </li></ul></ul><ul><li>Range of Large, Medium, and Small companies </li></ul><ul><ul><li>¼ Large : growth potential of 5 to 7 percent </li></ul></ul><ul><ul><li>¼ Small : growth potential of 12 percent </li></ul></ul><ul><ul><li>½ Medium : growth potential of 7 to 12 percent </li></ul></ul>
  6. 6. Key Factors in Investment Analysis <ul><li>No stock will be purchased without advance analysis </li></ul><ul><li>Analyze every prospect for </li></ul><ul><ul><li>Management Capability </li></ul></ul><ul><ul><ul><li>Single most influential element of growth </li></ul></ul></ul><ul><ul><li>Reasonable current share price </li></ul></ul><ul><ul><ul><li>expected to rise as financial results improve in the future </li></ul></ul></ul>
  7. 7. Three Tests of Management <ul><li>Rate of growth </li></ul><ul><ul><ul><li>sales have increased at least at the expected rate for their size </li></ul></ul></ul><ul><ul><ul><li>Offer the promise of continuing advances </li></ul></ul></ul><ul><li>Pre-tax profit margin </li></ul><ul><ul><ul><li>Deducting costs from sales and then dividing the result (profit before taxes) by sales </li></ul></ul></ul><ul><ul><ul><li>Higher margin is preferable – careful if too high or low </li></ul></ul></ul><ul><li>Earnings on stockholders’ equity </li></ul><ul><ul><ul><li>Net earnings divided by the sum of the value of preferred stock, common stock, and retained earnings </li></ul></ul></ul>
  8. 8. Three Tests for Reasonableness of Share Price <ul><li>Earnings per share </li></ul><ul><ul><li>Should grow on a per-share basis at approximately the same rate as sales </li></ul></ul><ul><li>Dividends </li></ul><ul><ul><li>Pays out no more than half of its earnings </li></ul></ul><ul><ul><li>Dividend yield of 4 to 6 percent on the price paid for the stock usually can anticipate stock price appreciation </li></ul></ul><ul><li>Price Range </li></ul><ul><ul><li>Review the lows and highs over the past few years </li></ul></ul>
  9. 9. Two Methods of Stock Selection <ul><li>Fundamental Procedure </li></ul><ul><ul><li>Study the company, its industry, and its market </li></ul></ul><ul><ul><li>What makes the company run and what its future will be </li></ul></ul><ul><ul><li>Looking for companies to grow and increase in value over a long time period </li></ul></ul><ul><li>Technical Procedure </li></ul><ul><ul><li>Focus on stock market and stock price </li></ul></ul><ul><ul><li>Expect to make more money from the price movement caused by different stock market forces </li></ul></ul><ul><ul><li>Goal is usually to catch fairly quick price moves </li></ul></ul><ul><li>* Individuals who followed short-term, technical techniques over a sixty-year test period had to be right 80% of the time to achieve the same results as the investor who bought good-quality growing companies, held them for long periods of time, and made few changes </li></ul>
  10. 10. Finding Companies to Study <ul><li>Business Publications </li></ul><ul><ul><li>Wall Street Journal, Business Week, Fortune, Forbes , or NAIC’s Better Investing – “Stock to Study” </li></ul></ul><ul><li>Local companies </li></ul><ul><li>Family, Friends, Business Acquaintances who work or are familiar with other industries or markets </li></ul><ul><li>Internet </li></ul><ul><li>NAIC Low-Cost Investment Plan </li></ul>
  11. 11. NAIC Low-Cost Investment Plan <ul><li>Enables us to reinvest earnings and additional funds in additional partial shares of stock with little or no expense </li></ul><ul><li>One-time $7.00 charge for each stock </li></ul><ul><li>Information on a Plan companies is readily available for your investment analysis </li></ul><ul><li>As a Plan participant, we will be following NAIC’s proven philosophy </li></ul><ul><li>Contact NAIC for more information </li></ul>
  12. 12. Annual Reports <ul><li>Public relations document also including full financial disclosures </li></ul><ul><li>President’s “Message to Stockholders” </li></ul><ul><li>Financial statements </li></ul><ul><ul><li>Balance Sheet </li></ul></ul><ul><ul><li>Income Statement </li></ul></ul><ul><ul><li>Statement of Cash Flows </li></ul></ul><ul><li>Narrative sections focusing on different product lines, research activities, foreign operations </li></ul><ul><li>Independent auditing firm’s certification </li></ul>
  13. 13. Annual Reports - The Balance Sheet <ul><li>Depicts a company’s solvency or financial position at a specific date </li></ul><ul><li>See handout for example </li></ul>
  14. 14. Balance Sheet Terminology <ul><li>See Chapter 3 of the NAIC Official Guide –”Starting and Running a Profitable Investment Club” </li></ul>
  15. 15. Analyzing the Balance Sheet <ul><li>See Chapter 4 of the NAIC Official Guide –”Starting and Running a Profitable Investment Club” </li></ul>
  16. 16. Annual Reports – The Income Statement <ul><li>Also called a profit and loss statement </li></ul><ul><li>Reports income, costs, expenses, and profits (or losses) over a period, usually one year </li></ul><ul><li>See handout for example </li></ul>
  17. 17. Income Sheet Terminology <ul><li>See Chapter 5 of the NAIC Official Guide –”Starting and Running a Profitable Investment Club” </li></ul>
  18. 18. Analyzing the Income Statement <ul><li>See Chapter 5 of the NAIC Official Guide –”Starting and Running a Profitable Investment Club” </li></ul>
  19. 19. Tools for Smart Investing <ul><li>Stock Check List </li></ul><ul><li>Stock Selection Guide and Report (SSG) </li></ul><ul><li>Stock Comparison Guide (SCG) </li></ul><ul><li>Portfolio Management Guide </li></ul><ul><li>Portfolio Evaluation Review Technique (PERT) </li></ul>
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