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Bianca's first pick
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"Everything Apple is cool. Doesn't matter if you can get an MP3 player that does more for less - everybody wants an iPod. Same with everything else they make or might make. Apple is cool." Here's Bianca -- my collaborator on the portfolio for the Strategy Lab Open. She is my "Little Sister", and she represents the younger generation in a family trust. Having just turned 15, she's totally up on what teens consider cool, and she uses that knowledge to pick stocks.
Bianca was sure: when Apple's ratings were good and so was the price, we should buy it. Bianca starts researching whether a company is as good as its product or service by checking Morningstar. Like a good student, she looks for A's in growth, profitability and financial health. Then she looks at MSN Money StockScouter rating. A perfect 10 - as Apple has at the moment - is what she prefers, but she'll "settle" for a 9 or 8 if there are enough other good ratings. Then she reads the rationale behind the StockScouter rating. In this case it says: Pro Con Five year figures are very important to Bianca. She recently studied the Great Depression in school and found it very scary. She doesn't want to make mistakes that economists discovered how to avoid in the 1930's, and they established then that five year trends are much more reliable than 1 year trends. Next Bianca checks the StarMine ratings for a stock. These are the opinions of the analysts with the best record of making recommendations on a particular stock. At this time for Apple there are 3 analyst companies whose accuracy in predicting the ups and downs of Apple stock prices exceed 79%. All three Market Edge (100% accuracy), Deutsche Bank (82%) and UBS (79%) rate it a buy. Finally Bianca goes to Yahoo Finance to find the company's competitors and then goes to "Charts" to see how the company she is considering compares with its competition for the year and for 5 years. Apple totally blew away DELL, HPQ and MSFT. Apple passed all Bianca's tests, so the next step was to pick a price. In the week before the competition started, Apple stock prices soared to as high as $146, way too expensive for Bianca. Still at Yahoo Finance, she checked under "Historical Prices" for Apple. $130, 10% lower than present prices and the lowest price since the beginning of July, seemed like a good sale price to shoot for, and that is where we set the limit price for our purchase. It triggered this week, and we got it. If we had it to do over, we would have set the price at $115, but Bianca is happy to be an honorary Apple shareholder. | ||
