Mad Money by Jim Cramer

  1. Learn in a precise manner how the company makes money
  2. List and understand all possible things that can affect the performance of the sector
  3. Examine recent performance and the company it represents a chunk of
  4. Compare the stocks to its competitors and make sure it’s competition doesn’t represent a serious threat

Look at the company’s income statement, balance sheet, cash flow statement- but most importantly the last 2- to make sure that the company you are investing in is actually viable

Stock Worksheet

 

STEP ONE: Find out how the company makes it money

  1. How did it make money last year?
  2. How did it make money last quarter?
  3. Are these high or low quality earnings?

STEP TWO: What sector does the company belong to and how has that sector performed?

Sector:

Sector performance over last three, six and twelve months:

What forces tend to move stocks in this sector?

 

STEP THREE: How has the stock performed?

Last year:

Last six months:

Last three months:

Last month:

Last week:

STEP FOUR: What do the comparisons tell you?

Does this company face any threatening competition?

What is the P/E of this stock?

What is the average P/E of its competitors?

How much cheaper or more expensive is this stock compared to its peers?

    Based on P/E

    Based on PEG

STEP FIVE: Can the stock survive its balance sheet?

How much debt does this company have?

How much debt does it have due this year?

How much free cash flow should it have this year according to analyst estimates?

Will this company generate enough cash flow to pay its debts this year?

Can it pay its debts next year?

Will it have to sell assets to pay its debts in the near future?

STEP SIX: Does this stock look like a good investment in light of your homework?

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~ by antinomian on July 13, 2007.

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