SIMPLE STOCK ANALYSIS
Who are you, and how do you want to invest?!
Who are you!?
In short, most people invest based on their own personality. For example, someone who likes more risk may pay less attention to today's economy but more to tomorrow's economy.
This is something you will slowly learn as you invest—how you handle value declines, increases, whether you prefer having plans for stocks, how adaptable you are, and if you end up with regretful sales and purchases.
It's crucial to figure out and work on these aspects. For instance, I am bad at handling value declines and increases, leading me to sell a stock too quickly and often make relatively poor choices with individual stocks. Examples of this include selling individual stocks when they are undervalued. So, one of my biggest challenges is simply not selling a stock.
What have I learned from it? Dividends, price, and not keeping track.
Dividends give me incentives to hold a stock, both up and down. If a stock performs poorly but pays dividends, it's easier to avoid realizing losses.
I spend time finding prices for each stock and divide it into three. For example (not real data), let's say I value Equinor at 300 NOK per share. Then, I set something called a 'price alert' (an alarm that notifies when a stock reaches a certain value) at 300 NOK, a price alert at 250 NOK, and a price alert at 200 NOK. This ensures I don't dive too deep into a single stock, get some good deals on stocks, and make sure I don't have to actively monitor to get desired prices. I also try to understand why a stock's price has fallen, triggering the price alert.
Here is an example of historical price alerts:
In the cases above, I looked into NIBE Industrier AB class B but chose to refrain from buying Intrum AB and SPIR GROUP ASA. This led me to take a fresh look at the stocks before putting them aside again.
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I hope this provides you with a glimpse into some things to consider when investing. The best way to figure out your own methods is to know yourself and gradually learn how you want to do it
Investment Strategies
In this segment, let's take a quick look at some of the most common investment strategies out there.
Active and passive investing.
Active investment:
A type of investment that involves staying highly involved. You actively research, buy, and sell individual stocks. This typically requires a significant amount of time but can be beneficial if you build up knowledge. If you work in certain sectors, having insider knowledge can give you an edge.
Passive Investment:
Passive investment is typical for index funds, where you buy a group of stocks without actively managing them. This suits most people as index funds have low costs. I will also introduce passive stock investment, where you 'create' your own index fund. It's important to have good sector control, or else you can simply buy individual stocks and hold onto them over time. An easy method is to look at the holdings of funds and buy based on that.
Note: This can be a bit risky as you won't be actively monitoring.
Growth:
Growth stocks are the most modern and dynamic investment strategy. It often focuses on stocks believed to be winners for the next 5-20 years. Examples include Tesla, Apple, Scatec, and SBB. These are widely different companies that had a lot of favor for a period. Here, gains and losses can happen quickly.
Here is an example of Scatec. This illustrates the risk involved. Many expectations may not always materialize. But when they do, just look at the extraordinary growth of Apple and Tesla since their inception. If you like a bit more risk and see opportunities, growth might be a suitable strategy for you.
Value Investment:
Here, the focus is on companies with a high value of assets based on price. For example, if you get a company at 20% below its asset value, one could argue you got a deal. Some interesting examples of this are Byggma and 2020 Bulkers. 2020 Bulkers, a cyclical shipping company, recently (as of 15.02) sold 2 out of 8 ships for about 1/3 of the company's value. This suggests that the value for the remaining 6 is below the current evaluation.
Byggma, on the other hand, holds a larger stake in a company called Norske Skog. With a P/E of around 10 and a relatively small value compared to Norske Skog, they have about 1/3 remaining. They currently hold an 18.49% stake in Norske Skog, and it should be noted that Norske Skog has significantly fallen in value. However, in the past, this value has been somewhat hidden, and at times, the value of Norske Skog has equaled the price of the entire Byggma group.
Value investors typically look for less risky investments, with the idea that the asset value should have a lower price than the market value of the company.
Dividend Investments:
An investment strategy where you look for companies that pay dividends. This became popular with the compounding effect and poses a certain risk for investors like me. Knowing that a thousand bucks will come in next month makes it easier to hold onto the stock and provides an extra incentive to like it. There are some weaknesses with this strategy. The most significant often indicates that when a company is willing to pay dividends, they have no better use for the money. This suggests that the growth phase is over, and there might not necessarily be much growth potential in the company. As weaknesses, I can mention Telenor and Orkla in this context, where there hasn't been any real value increase for many years. It should be noted that exceptions exist; Protector Forsikring and New Wave Group focus on growth and still manage to pay dividends.
These are just some of the investment strategies that exist, and there are many more. Personally, I use a light mix of several investment strategies.
