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How I Pick My Stocks: Investing For Beginners - YouTube
Channel: Mark Tilbury
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hi guys it's mark so i've got a secret
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it's about time we talked about it
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this is my crystal ball and it allows me
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to predict
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everything the stock market's going to
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do in the future look if anyone tells
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you that never believe them
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they're probably just trying to sell you
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one of those courses for 997 dollars so
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even though there's no magic ball that
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can tell you when to buy a stock before
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it rockets in value and makes you a
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millionaire overnight
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there is certainly a few things i do to
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tip the odds in my favor
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and that's what i'd like to share with
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you guys today as i've got older and
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slightly grayer
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i've found that knowing the reason
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behind why i stopped my changing prices
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helped me make
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and save a lot of money if you're new to
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the stock market then a stock is a small
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part of a company and when you buy
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you actually become a part owner the
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idea is to buy parts of a company that
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you believe will go
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up in value so you're able to multiply
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your money
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without doing any extra work but let's
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face it investing in the stock market
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can be pretty confusing
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and most people just pick companies on a
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whim however that's not how i do it
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so by the end of this video you'll know
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my actual strategies for picking great
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stocks
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and don't worry i won't be trying to
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sell you anything so you can just sit
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back and relax
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so there are two main ways to attempt to
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predict the stock market these are
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called technical and fundamental
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analysis
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a good way to think about this is like a
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scale usually short-term day traders are
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purely focused on technical aspects
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these include looking at charts and
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patterns they believe that they can
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predict how the stock will change in
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price by judging the highs
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and the lows on the graphs they're the
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geeky ones nah i'm only kidding it's
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just not how i do it my whole investment
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strategy is about keeping it simple
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lots of people talk about using margin
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and options but that's really not
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something i worry about i'm a long-term
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investor so this means i'm a lot more
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focused on the fundamentals of a company
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this includes the financials the
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leadership and the brand recognition
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as i believe this is where the
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information lies to indicate the
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long-term success of a stock however
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like i mentioned
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it's a scale so i do cast my eye over
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the occasional chart in order to find
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the best time to buy this approach has
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helped me to find some really good
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investments over the years
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rather than just dipping in and out and
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trying to make a profit on a daily basis
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the amazing thing is the majority of
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professional traders are still unable to
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be a low-cost index fund
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over the long term this may sound quite
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complicated but it's actually very
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simple
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so this bucket represents an individual
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stock and the water
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is me pumping all of my money into that
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company
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this represents an index fund each cup
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being a different company and the water
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i'm putting in
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is the money i'm spreading between each
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of them in one
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easy investment for whatever reason if
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this company goes bankrupt then guess
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what
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or my money goes down the drain now this
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is the same company and it still goes
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bankrupt
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but the good thing is i may lose my
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money in that small investment however
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i've got so many more stocks and i've
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done really well in some of them
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which means i've actually made a profit
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overall
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my favorite index funds track the s p
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500 which are the top
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500 public companies in the usa so even
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though the majority of my money goes
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into index fund investing
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i also have a lot of fun picking
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individual stocks and watching my
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portfolio grow
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on this note if you'd like an easy way
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to get started public are currently
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giving away a free stock worth all the
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way up to 50 dollars when you fund your
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account
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if you want to pick that up i'll leave a
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link in the description and if you're in
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the uk
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free trade are giving away a free stock
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that could be worth up to 200 pound when
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you deposit as little as two pounds
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i'll leave that link below as well it's
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a great way to get started with
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individual stocks and basically it's
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free money right so now you've got your
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free stock and you're ready to invest
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into some more
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but where should you start well if
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you're anything like me it makes sense
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to start with the numbers
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we call this quantitative analysis
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whenever i'm thinking about investing in
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a company
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i make sure to look at all these figures
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first if the financials don't look good
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to me
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then it's very rare that i do any
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further research into the company it's
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kind of like when you go on a first date
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with someone and they seem really nice
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however it isn't until you really start
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getting to know all the details about
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them that you might start to notice
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their flaws
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like eating with their mouth open or
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picking their nose if only they gave you
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a non-biased comprehensive list of how
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they actually are
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so you can make an educated decision
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whether you want to date them or not
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i don't have a solution to this problem
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but luckily that's exactly what
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companies do it's brilliant
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you can find out this information for
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free on yahoo finance which is the
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website that i use there are three main
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aspects that i look at
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first let's break down the balance sheet
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i know it doesn't sound too interesting
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but
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trust me this is where you find some of
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the real juicy information
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the whole purpose of this sheet is in
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the name to balance
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assets and liabilities think of it a bit
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like this
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you may own a watch or a rental property
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and these are your assets
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but let's say you have loads of credit
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card debt this is one of your
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liabilities
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so let's break down some of the
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gobbledygook terms so you can easily
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understand this complicated looking
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sheet and impress your friends
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assets are broken down into three
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categories current assets are things
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that could be turned into cash within 12
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months
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longer term assets are things like their
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headquarters which they usually don't
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sell in a hurry companies can also have
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assets that you can't physically touch
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known as non-tangible assets
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such as the brand recognition of an
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established business
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that has been trusted for generations i
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like to think of coca-cola and then we
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come to the liabilities and what i'm
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really interested in here are the
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current liabilities
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as this is the debt that they'll need to
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repay within 12 months with this there
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is a simple calculation you can do to
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easily know if the company is high risk
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or not
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and that is total current assets divided
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by total current liabilities
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a good rule of thumb here is the number
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should be above one but how does this
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work in practice
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let's take apple's balance sheet for
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example apple's total current assets
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divided by their total current liability
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comes to
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1.4 when rounded up this is great as now
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we know that apple are able to pay off
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all their short-term debt nearly one and
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a half times
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the second document that's really
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important to have a look at is the
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income statement if you've ever heard
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the saying of the top and bottom line
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this is where it comes from at the top
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of the statement this is the total
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revenue which is the total the business
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take and at the bottom is the net income
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which is the money the company makes
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after all the expenses have been
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deducted
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every business has these expenses the
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cost of operation
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and the cost of revenue so let's take a
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simple business like a smoothie company
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their cost of revenue is fruit
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they can't make the smoothies without
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buying that therefore that is a cost
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they have
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no choice about it's a simple fact of
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running their business but the next
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thing they do have a choice about which
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is their operating expenses
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who they're hiring and what kind of
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wages that they're paying them after
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these expenses are deducted from the
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total amount of money they take from
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their customers
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you get the operating income so here's
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my simple calculation that lets me know
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if the business is healthy
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operating income divided by total
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revenue
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times 100 ideally i look for above 15
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using apple again let's take this number
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divided by
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this number and we get 27 which is great
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the last one of the big three is the
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statement of cash flow
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i'm not going to spend too much time on
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this one as when you boil it down
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it's pretty simple the main thing i look
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out for is if the company i'm investing
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in has increase in
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free cash flow year on year which is
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money
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they can use to reinvest or pay back to
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investors
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a big red flag here is sometimes i see
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the cash flow is negative
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but the company is still paying
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dividends back to its investors
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it's just unsustainable and eventually
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the business is just going to run out of
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cash
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now once i've had a good look at all
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these numbers it's time to get into the
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juicy stuff and that's all about
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analyzing the qualities of a company
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this is known as qualitative
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analysis one of the qualities i look for
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is brand recognition
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when i say the word apple most people
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think about the company
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rather than the fruit i know i keep
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referring to it but it's a great example
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of amazing brand recognition that won't
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be going away anytime
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soon being a household brand name comes
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with a lot of consumer trust so when
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they launch a new product
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people are much more likely to try it
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out especially if it's something unique
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or groundbreaking such as the ipad
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and we like to show it to you today for
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the first time
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and we call it the ipad
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this helps companies like apple shape
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our future and create entire new markets
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and revenue streams another great
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example of brand awareness is coca-cola
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it's the second most recognized word in
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the world after okay
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something that really affects price
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movements is the news i always keep an
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eye on it and in particular
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rumors on social media you may have
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heard about the whole gamestop situation
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where a small bunch of retail investors
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managed to outsmart the top hedge funds
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by finding a flaw in their strategy they
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were able to use this to their advantage
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and earn a lot of money
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tonight it's wall street's david versus
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goliath the struggling video game
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retailer gamestop skyrocketing about 8
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000 percent over six months
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but once the news broke and more people
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started to jump onto the bandwagon
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the big profits had already been made
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this is a great example of the age old
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saying
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buy the rumor sell the news i learned
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this valuable lesson during the dot-com
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boom in the 90s
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when i started investing people were
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amazed that i was pouring money into
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companies whose main asset was
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a dot-com domain name however within six
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months it seemed that everyone's telling
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me that they were buying shares in
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dot-com companies
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even my hairdresser i decided to start
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selling to buy more real estate just
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weeks before the bubble burst
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and i managed to save the majority of my
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profits others weren't so lucky
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everyone thought that internet
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businesses were the future and they were
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eventually right however most of the
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original companies never recovered and i
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saw some of my friends make
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millions just to lose 90 percent of
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their investment when everything crashed
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only a handful of companies managed to
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weather the storm such as amazon this
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showed me that the hype generated by the
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news and other people talking about it
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really just caused the prices to get out
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of control and become
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unsustainable so whenever i feel like
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hype is driving the price of a
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particular stock i know that it probably
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isn't a great long-term investment
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although with the dot-com bubble it is
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true that a lot of companies did rebound
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eventually the next important factor is
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the leadership of the company
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even more so nowadays with social media
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and what the leaders say is having a
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huge effect on the price of the stock a
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prime example of this is elon musk who
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is very clearly the visionary behind all
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of his companies
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one of them of course being tesla just
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imagine if elon musk decided he was
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bored of making electric cars and
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tweeted that he was standing down from
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tesla to focus on spacex
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and his mission to colonize mars i think
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this reliance on
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elon musk is one of tesla's greatest
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strengths but also one of its greatest
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weaknesses
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as the company is highly affected by his
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actions this brings me to my next point
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which is to look out for emerging future
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industries like electric vehicle
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technology which tesla is leading the
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way in
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these types of investments are really
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your growth stocks
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my friend simon squibb often tells me he
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believes that in the future
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doctors will be replaced by artificial
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intelligence this sounds like the stuff
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of science fiction however when i was
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younger
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this was what i used to see on star trek
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spark
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spark here in fact this is even better i
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actually first heard of tesla when it
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was featured on top gear in 2008
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it wasn't a very flattering review as
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they showed the car running out of
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batteries in 50 miles which was only a
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quarter of the advertised range elon
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wasn't very happy about this and he
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actually later filed a lawsuit against
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the show however the segment certainly
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piqued my interest
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and i could see they were onto something
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during my time investing i've seen a
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huge shift in each sector or if you're
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american at home sectors
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let me take you back to when i was
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younger if you can imagine that far back
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i remember sitting at my grandma's house
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and watching this guy come along with a
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sack of coal on his back
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which he would deliver to my grandma so
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she could heat her house
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nowadays most people use gas so no more
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mr coleman
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and this sector is all set to change
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again with the introduction of renewable
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electricity but that's
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three major shifts that i'll experience
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in my lifetime if i'd been stuck in my
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ways and not taking notice of these
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changes
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then my investments would have been left
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in the past just like the coal industry
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so before
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investing in a stock i always think
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about whether a future shift in sector
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will have a positive or negative impact
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on that company
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but how do i predict when the best time
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to buy is you don't but there's a
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strategy
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i use to get around this and it's called
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dollar cost averaging let's imagine you
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were to invest once a month for three
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months
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month one the stock might cost you two
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hundred dollars month two
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hundred and fifty dollars a month three
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hundred and thirty dollars of course if
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you knew it was going to dip to 130
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you'd have bought then however no one
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knows how low the price will go but by
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doing this instead of investing all your
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money in month one when your stock was
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at 200
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you actually lower your average buying
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price to 160 dollars this is also known
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as
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buying the dip instead of getting scared
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and selling like the majority of people
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would
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the idea is to buy more because it's
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like having a garage sale
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and if you've done all your research and
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you like the company
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then the stock is at a bargain price so
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i'm going to leave the next video right
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up there but don't click on it just yet
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make sure to subscribe for more videos
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and pick up your free stocks with the
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links below
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okay i'll see you over there
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