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Investment Analysis Clubs / The BMW Method


Subject:  Re: BMW Assumption #1 Date:  3/12/2018  8:37 AM
Author:  Beishma Number:  42217 of 42349

In addition to the BMWm chart, I use traditional fundamentals. I check 10 years of: profit margin, revenue, debt levels, # of shares outstanding, dividend history, and comparative performance within a narrowly defined "industry" grouping. "Due diligence", imo, doesn't involve any technical analysis. These value metrics reveal a lot about the health of a company or of an industry. Comparing specific industry groupings is important as is the general condition of the market (over-valued?). Take "consumer staples" for example. The revenue of some of these majors (PG, Kraft, KO, CL, TR, KMB) have flat-lined for many years now. The industry group itself has hit a wall, are losing to generics or face increased competition. Pepsi at a P/E of 33? Why? Growth is negligible. So how good a measure is "price"? Interestingly, check the CAGR of Pepsi at the 40-year bmwm chart(15), and step ahead over each 5-year increment. It's on a CAGR descent down to 8 on the 16-year chart. So, in this case, I'd be very reluctant to buy PEP at an attractive RMS or return factor. Not unless lightening strikes this over-priced stock or KO goes bust.
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