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#10 - Is it falling apart?


Stock Picking after Moat | Invest with Martin

The American market sets the tone


It’s the same topics we’ve talked about before. Inflation is high, the war in Ukraine is still going on and China remains largely closed down due to covid.


But now we have a new headache:


Amazon came out with a disappointing first quarter of 2022.

Apple also delivered a weak outlook into the future due to supply chain issues, and the big American banks are also showing signs of slowing down.


This is somewhat alarming to me.

Because of the size of these companies, they give a good indication of how its going for the American economy and the normal American consumer.

And, like always, what happens in the US tends to ripple down into most other countries, also in Europe. That's why we follow these huge companies, and always look at the US as both the benchmark and as the one setting the tone in the market overall.


The consumer is key here. We (us, the consumers) still have a lot of savings from covid, which is waiting to be released into the markets.

This means more revenue for the companies, and it’s what the optimistic professional investors rely on, for us not to go into an economic recession.


But just think about your own situation. Surely your bills at home are more expensive, milk is more expensive, gas is more expensive, and so on. My brother can literally sell his used car for more money than he bought it for. It’s crazy!


So ask yourself, is it right now you want to buy a new iPhone through Amazon? Maybe not. You want to be more careful with your money.


All this, plus everything going on at the moment in the world, is why the markets went down around 13% this month alone. Which is A LOT.


So again, what to do?


If you are invested, keep calm and see if you have room to put in more, now that the markets are down.


If you want to get into the broader markets, do so slowly now that they’re down. I’ve talked about this again and again.


I will start writing about how you can do this in more detail, once we have been going through the basics of the stocks.


And with that - let’s look at those basics!


Companies that make money for us

The last time we talked about the company making money and being good at it.

This shows in their revenue, profit, return on equity and return on assets.

But we’re missing the part that says “making money for us”.

Which, of course, is the most important.

Again - when you invest in a company, you own a piece of it and as such you should see yourself as entitled to some of the earnings. Afterall, why otherwise buy the shares.


This is where earnings per share comes in, or the EPS. Yes, the financial world likes abbreviations for everything.

Like it says it tells how how profitable the company is per share. And we buy shares, so how much are we making per share?

Again it will be Microsoft, and again it will be data from Macrotrends.


This shows a nice long growing trend.

They are making more and more money for us, per share.

In fact, it grows at 17% per year.

You ideally want it to grow faster than the profits, or more than 9% as a benchmark.

EPS is usually the first thing I’m looking for. It’s what matters most to me as an investor. You shouldn’t care about great revenue, low debt, nice products and so on, if they are not making any money per share at the end of the day.

So now you know. EPS. Don’t forget it, always look for it.


Next time, we look at what price you should buy the company at. Hint: it should always be on offer (which we can calculate as well). As always, stay awesome



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