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  • Best Investing For Beginners Advice - How TO Find Good Stocks

  • How to get started with investing - simple steps to start investing

  • intro

  • How many millionaires do you think are there in the world?

  • You won't believe this number, but there are almost 47 million (46.8 million) millionaires

  • worldwide.

  • And guess what?

  • 18.6 million of them are right here in the United States

  • Let me give you one more shacking statistics.

  • Every year around 700K people become a millionaire just in the united states alone.

  • It seems like becoming a millionaire isn't as difficult as many of us led to believe.

  • But as we all know, it's almost to become one if you do not learn how to invest.

  • Most people are interested in the stock market but the problem that many people face is how

  • to find good stocks?

  • How do you know if it is a good stock to buy?

  • People usually base their decision on the news.

  • If the stock is rising and it gets a lot of attention, it must be a good investment and

  • vice versa of course

  • Unfortunately, that is the worst way to invest.

  • By the time it's out there in the news, you are probably late.

  • So here in this video, you will learn how to find great stocks?

  • How do you find stocks that will rise in value over time?

  • If you stick around, by the end of this video, you learn how to analyze stocks like a professional

  • investor

  • Why stock prices mean nothing.

  • Apple's has a valuation of 2 trillion dollars

  • and its stock price is traded at around 120 dollars at the time of this script.

  • But, what if I told you that, just in august of this year, Apple's stock price was 500

  • dollars.

  • Does that mean that the company was already valued at 10 trillion dollars, and it lost

  • 80% of its value in the last few months

  • In fact, apple's stock price in June 2014 was 645 dollars.

  • Does that mean that the company was way more valuable back then?

  • Not really!

  • That's why looking at the stock price is not investing! - oh yeah, what's Warren Buffett's

  • quote.

  • If it already seems too confusing, don't worry,

  • because that's why I am here, to simplify everything for you and turn you into a professional

  • investor in under 10 minutes.

  • Because the YouTube algorithm told me that my audience are some of the smartest subscribers

  • on the entire platform and they learn 10x faster than anyone else.

  • So I am counting on you, don't let me down

  • If you take a look at the companies that are

  • traded in the stock market, they have a price tag, but because no one can afford that, they

  • are broken down into many many stocks.

  • The key question is, does this company really worth 768 billion dollars

  • The answer is NO

  • You see, there is a big difference between Price and value.

  • The stock price jumps up and down every single day.

  • Even slightly negative news that could be fake can drive the Price down, however not

  • the value, because the value is what the company is really worth.

  • For example, in July 2018, facebook's earnings weren't as high as some investors expected,

  • so the stock price fell from $217 to $176.

  • That's a 20 percent decline.

  • The company lost 120 billion dollars of market cap in a single day.

  • Does that mean the company became 20 percent smaller overnight?

  • Of course, No!

  • That's why the stock price jumped back to its pre-decline level and is 32 percent higher

  • now.

  • So if you want to make a good investment,

  • you have to find out the real value of the company and then compare it to the Price that

  • it's traded in the market.

  • If it's undervalued, it's a good investment.

  • If it's overvalued, it's a bad investment.

  • It is as simple as that.

  • In 2002, Buffett came across a company called Petrochina.

  • After analyzing its financial statements, it was clear that this company worth at least

  • 100 billion dollars, but when he looked at its market cap, the company was traded at

  • just 30 billion dollars, and base on the political climate, it was clear that oil prices would

  • rise, he knew that it was a golden opportunity, so he invested almost 488 million dollars

  • into this company.

  • Guess what happened?

  • The company didn't just reach a 100 billion dollar valuation, but it skyrocketed to 275

  • billion dollars.

  • Buffett sold his stake and earned 3.6 billion dollars from this deal.

  • So the question is

  • - how do you find the real value of a company.

  • One of the most popular methods is the P/E

  • ratio or Price to earnings ratio.

  • It basically means the amount of money investors are willing to pay for every dollar that the

  • company earns.

  • It's a simple tool to measure if the stock is overvalued or undervalued.

  • Let's say hypothetically, Apple earned 2K dollars this year and has a total number of

  • 1000 shares.

  • Dividing apple earnings on the total number of shares gives us earnings per share or EPS

  • in short.

  • This means Apple has earned 2 dollars for every share.

  • To find the P/E ratio, you have to take the Price of the share, let us assume it's 50,

  • and divide it on EPS (50/2=25).

  • In this example, investors are paying 25 dollars for every dollar that Apple earns.

  • In other words, it would take the company 25 years to pay you back.

  • A good PE ratio is considered something around 15.

  • Anything higher than that could mean that the stock is probably overvalued.

  • Tesla's PE ratio is, for example, 970.

  • Does that mean Tesla is overvalued?

  • Maybe, or maybe not

  • When finding a PE ratio of a certain company, we take into account earnings per share for

  • the last 12 month, but when you invest in a certain company, past earnings don't matter.

  • What matters is how much the company is going to earn in the future, which is why there

  • is something called forward P/E ratio

  • Of course, You can't know for sure how much the company is going to earn in the future,

  • so the number that is used is the average of what experts usually predict

  • If we go back to Tesla, despite it having an anstonomical PE ratio (970), its forward

  • PE ratio is closer to the earth at 123.

  • Which means, That you will have to wait 949 years to earn your money back if you invest

  • in Tesla based on its past 12 month earnings, but experts are calming us down by saying

  • that "don't worry, its that long, Tesla is going to be much more profitable so its just

  • 123 years" which is why most investors consider Tesla an overvalued stock.

  • But we all know that Elon Musk is an alien, and he is going to prove everyone wrong, as

  • he does all the time.

  • The price-to-earnings ratio isn't the most accurate method to value a company, but it's

  • the simplest way to have a broad idea of how the company is performing.

  • The company might come up with a revolutionary product and beat all expert predictions

  • So to make a wiser prediction, you have to

  • consider other analyses as well, such as Price to book ratio (P/B Ratio).

  • It basically means how much the company is going to earn if it sold all of its assets

  • and paid off its debts.

  • Let's return back to Tesla.

  • Tesla has gigafactrories, thousands of charging stations, offices, patents, and a lot of other

  • assets.

  • Let's say they all amount to 100 million, but it also has a lot of debt, let's say 70

  • million dollars.

  • If we subtract its debts from its assets, we will get a book value of $30 million.

  • So if Tesla has 10 million stocks, its book value per share is going to be $3 ($30M/10M

  • shares).

  • To find out how much you will be paying for each dollar, you have to divide the stock

  • price, which is, lets say $15 by the book value of shares.

  • In plain English, you will be paying 5 dollars for each dollar of assets that Tesla has.

  • A good price to book ratio is considered something around 1, but sometimes it's really difficult

  • to put a price on something like an algorithm that Instagram is running on or Snapchat filters.

  • But financial analysis is just one part of

  • the story.

  • Startups, for example, usually have a lot of debt and not many assets and might struggle

  • with cashflow, but could end up becoming widely successful.

  • So never rely on financial analysis as the sole predictor of a company's success, there

  • are many other indicators that we have covered in previous videos, which links I will leave

  • in the description, nevertheless, financial analysis can give us a better image of how

  • the company is performing.

  • If you guys enjoy this kind of these videos,

  • let us know by giving this video a thumbs up and sharing it with your friends and we

  • will make sure to make more similar videos.

  • And if you are new around and want to learn more about the stock market and want to achieve

  • your financial goals, make sure to subscribe and turn on your notifications, because that's

  • what we do on this channel.

  • Thanks for watching and until next time.  


  • 
 


Best Investing For Beginners Advice - How TO Find Good Stocks

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How to Invest in 2020 To Get Rich In 2021

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