Using technology to build wealth through the markets is the opportunity we need to build the capacity to be the people we want to be and live the lives we want to live. This can be highly-rewarding but can also be scary and full of risk. Without putting in the time, work, and commitment it is very possible that we lose our hard-earned cash and end up right back where we started.
However, the Low-Life Approach, or Poor Man’s Approach as we call it here, is focused on mitigating that risk and providing proper balance, assisting with homework along the way, and educating our community on those disruptive technologies that provide the opportunity we need to fuel our passions.
The stock market is filled with individuals who know the price of everything, but the value of nothing.”
(#CommissionsEarned)
-Philip Fisher, American Stock Investor, Best Known Work:
Common Stocks and Uncommon Profits, A Guide to Investing
Once we’ve jumped the hurdles, created a basic financial skillset, and established our baseline, its time to start making money with tech directly.
Yes, markets can seem scary. So much information out there makes it all seem so confusing. But we can do it.
Better leave it to a financial manager, right? That’s what they tell us; all those experts.
Wrong! Paying managers/firms their exorbitant fees is a thing of the past.
Do we need to be informed, yes! Do we need to do our homework, yes! But do we need to give away our financial futures to people who are more interested in making their margin more than our well being, not a chance! Its time to take the bull by the horns and redefine our wealth, our future, and our own individual selves.
ENGAGE
Engaging Means Work…
We never said this would be easy, simple yes, but easy, no! We have prepared the basics, included a fundamental psychology for approaching the market, now its time to scrimmage a few games, research our companies, then when we feel prepared get into the mix.
Doing Research
Knowing our game; the rules, the meta-structures/organization, our own psychological approach, and the players in the market will give us the edge we need to be competitive. Knowing the players means studying to understand.
Investing may be a lifelong process, but there are a few key characteristics that we can use to guide our research and stock picks. Measuring by both story-quality and a companies financial metrics offers a straightforward and digestible means of understanding the health and prospects of a company.
Story
We at BCB Cyber begin with the story. This is where we really begin to overlay the nature of technology onto our selections. As the story of growth stocks is closely interlinked to the technologies disrupting and changing our world, we can use the stories they produce to help us determine which are the best investments.
While reading a company’s website, investor presentations, news, press releases, etc. we can ask ourselves several questions. What is the role that technology plays in this company? Is it really being used to disrupt an industry or sector or is it a punchline to attract interest? Is this company gaining a real competitive advantage by employing disruptive tech? If so, how so? If not, is there another company that is?
Furthermore, we need to be keenly observing how the management is performing? Is this company always in the news for new acquisitions or pioneering new research? Do we hear stories of new debts being taken on while sales slump? Is this company changing how business is done or simply following the herd? Furthermore, what are the people on the inside doing with their shares: are they all in buying more, or are they getting out while times are still good?
Analyzing the qualitative, story-based, nature of these companies is important to build a high-level understanding of where the company is going and enables us to stick to our established baseline by building out a rationale for where a company is in it the lifecycle we presented in the previous section.
We use this analysis to inform our opinion and guide it, not to make it for us. If we hear a single bad story, we don’t overreact and sell unnecessarily. We need to form a holistic understanding in our mind, meshing and blending story elements to see the bigger picture.
Knowing the Numbers
Beyond the story, we must also follow the metrics; the numbers behind a company. No, we don’t need to know every single number, but there are specific metrics that we should know in order to critically examine a companies health and opportunity. There are five metrics that can be particularly useful for researching tech companies. These include sales growth, return on assets, comparative ratios (specifically, forward P/E), Operating Margin, and a Balance Sheet Debt Assessment.
While each of these can and should be examined using the various reports companies issue, we can also pull these numbers from a number of different sites. Yahoo Finance is a great accessible place to find these numbers. Finviz, Simply Wall Street, etc. are also great locations for information on our companies in question.
Five simple rules of thumb that can be followed:
- Sales Growth – depending on where a company is in a potential life cycle, growth can be tricky. If we are looking for a strong growth company to add, again we select different types of diversity in our portfolio, we want to see year-over-year growth of 20% or more.
- Return on Assets (ROA); calculated by taking the Operating Income of a company by its Total Assets. This metric helps us to understand how much company profits based on its assets (a company’s resources); generally, we look for positive ROA; the higher the better but positive is key.
- Forward P/E; calculated by dividing the price of a current share of the company by the estimated earning per share in the future. This should always be compared against industry and sector but generally, the lower the better. Lower Forward P/E will indicate we are receiving a better price for a stock given its future ability to make a profit.
- Operating Margin = Operating Income/Revenue
- Assessing Debt: We can quickly assess a company’s debt situation by looking at its balance sheet. Balance Sheets are wonderful tools in general but our rule of thumb specifies that to do a quick examination of debt situation we can look specifically at a comparison of Current Assets to the Total Liabilities of a company. If the Current Assets are greater than the Total Liabilities it is generally assumed that debts are well covered and that the company is good shape; in other words, they are not up against the possibility of things like bankruptcy.
These simple guides are a great place to start researching. Don’t worry though we won’t just leave our community there. Check back often with BCB Cyber as we will regularly release videos putting these assessments to use with a variety of companies to help us on our journey. With where we are in the 7 Elements, the next step on our journey though is to actually try all this out.
Learning the Game
There is no better way to learn about investing than by doing it. The simplest and best way is to do it for free. Learning (#CommissionsEarned) how to buy, sell, and trade stocks are as simple as one word: Robinhood. Webull too provides a fantastic opportunity with a much deeper interface but nothing is as user-friendly and easier to get started with than Robinhood.
With a mission to democratize financial markets/services, this company is the answer. The app Robinhood provides gives us the opportunity to set each other up with free stock and no other commitment beyond linking our bank accounts (#CommissionsEarned). We sign up, link our accounts, get a free stock, and begin trading.
Our recommendation is to invest for free and get your feet wet (#CommissionsEarned). Yes, we said free. With Robinhood we can get a free stock and invest nothing else, to start; maybe even forever. Follow our link, open a Robinhood account, link bank accounts, and wait! Once we receive our free stock we can begin to play. Following the day trading rules (more here), you can trade an intermittently to get a feel for things without putting up any cash.
Remember, I didn’ have much of anything to start with either. I was lucky to afford a hamburger at McDonald’s! However, I started small, like this. I put in little bits here and there and got the ball rolling. Just like that Snowball, everyone in stock market investing talks about.
A few rules to follow to keep you safe and keep you from overindulging. First and foremost, always do your homework! Never work blind. Know what you are buying, know the company, and make smart decisions (more here). Second, never sell at market price! Always set a limit price when we order, buying or selling doesn’t matter; always know and set our limit (more here). This way we never lose out to market excesses.
Investing is a lot of work, yes. However, market investing and trading companies can be a lot of fun too. More importantly, it can be extremely beneficial if done properly. Most importantly, even though we should each do it for ourselves, we are not alone. Come back often and check with BCB Cyber for the entertainment, inspiration, and education we need to keep us cyber-fueled up an building our portfolios.