Selecting a Large Cap Stock in an Industry Under Siege


Investing is a Business

Before investing our hard-earned money in an individual stock, it is always a good idea to think through our objectives and expectations for our portfolio as a whole. Is this the first play in a new sector? Are we looking do diversify our holdings? What is our time horizon? How much “play” are we willing to accept?

We approach each selection like a business decision. What return do we expect from this investment? What are the risks? What can we do to mitigate those risks?

What is Our Overall Goal?

Most important, what is our overall goal for our portfolio? Too many individual investors make “stock picks” based on emotions and the “news” from “talking heads” rather than facts. Ultimately, the goal for individual investors isn’t beating the market but mastering their own emotions and saving money for a comfortable retirement.

Our portfolio goal is to build a strong portfolio that will “stand the test of time,” and carry us into retirement, now is the time to invest businesses that have stock prices below their intrinsic value. We will start by screening for fundamentally solid companies in the Oil and Gas Industry, then conduct fundamental analysis to identify stocks where the current price per share is below the intrinsic share price, and finally choose one as our flagship business in our new sector.

Applying a Value Based Analysis

We are going to invest in a business by purchasing a share of their stock. Value investors look much more closely at the fundamentals of a business than at the technical performance of the stock.

Value investors expect the stock will rise because the business does well and outperforms its competitors. Now, everyone understands that the only time we are truly investing in the business is during a stock offering. We are simply buying a share that someone else is willing to sell on the open market.

Establish Downside Risk

We also must realize that at least one of every ...

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