The Framework Behind Every Stock I Touch

Twelve Fundamentals

If you consider yourself an expert in the markets, you can skip this one, no harm done. I really don’t mind if you sit this one out. My words but a whisper, your deafness a shout. I may make you feel, but I can’t make you think. (Jethro Tull, “Thick as a Brick”)

Most investors aren’t short on data, but they are drowning in it. Charts and price targets from people who change their minds faster than the weather are mostly noise dressed up as insight. A long time ago, I simplified because clarity beats complexity every single time. My “12 Fundamentals” aren’t a religion, they are a way to gain confidence and avoid doing something stupid, which is half the game.

Price, P/E, and Book Value are what you are paying for. People chase stocks like the last seat on a lifeboat without asking if they are overpaying.

Earnings per share and EBITDA are where the truth starts showing up. A company either produces earnings, or it produces excuses, and the market only tolerates the latter for two quarters.

Debt is the silent killer, where everything looks fine until it is too late, just ask Spirit Airlines.

Revenue tells you if the business is growing,

Cash Flow tells you if it deserves to.

Growth without the discipline of CAGR (Compound Annual Growth Rate) is just expensive enthusiasm.

Margins show you what sticks, because a dollar earned is not a dollar kept.

Volume movement represents behavior, institutions leave footprints, but most people never bother to look down. Then there are the things spreadsheets cannot measure.

Leadership is everything, I have seen the C suite turn average businesses into great ones or drive them into the ground.

A Moat means having an advantage rather than just a head start, you must defend the castle with something deep and wide.

Vision and innovation are where the future lives, if you aren’t evolving, you are setting up for a future fire that will torch the share price.

Finally, the Three Big R’s, ROI, (Return on Investments) ROE (Return on Equity, and ROA (Return on Assets), are the scoreboard.

Knowing these twelve is easy but following them when the market is uncomfortable is where most people fold. I built a system that keeps me from lying to myself. These twelve are mine, and they have led to a 42% return year over year and a 29% average over the last three.

This is not investment advice. It is perspective built from experience and observation. Always do your own research before making financial decisions.