Marketplace Roundtable #53: Finding Cash Flow Compounders And When To Buy, With Thomas Lott

Thomas Lott , an adherent to Graham and Dodd/Buffett style investing, joins the Marketplace Roundtable Podcast to discuss his strategy as reflected in the Cash Flow Compounders service. Lott seeks companies that have the ability to compound earnings per share better than market rates over an extended period of time. In this case at least 8%, which is more than the 6% annual average in the S&P 500 since 2015. It's not just about earnings growth, however. Investment-grade balance sheets, higher return on equity, high margins, and stocks that didn't lose material value during the Great Recession are additional factors that go into Lott's screen. Right now he has a list of "about 100 names" that he considers "best in class" and an additional list of 200 second-tier stocks. The critical decision is choosing an entry point for investing. Here Lott tracks prices to identify when stocks trade cheaply "to their typical trading patterns." He ranks the 100 names on a daily basis using "four or five metrics" and then does more fundamental work "to figure out if this is something I want to own." Right now, Lott sees markets "kind of at an inflection point" where there could soon be a shift from growth back to value stocks. One of his favorite ideas right now is Wabtec Corp. ( WAB ), a manufacturer of locomotives and locomotive parts that recently acquired GE Transportation. There are several factors that go into his thesis, all of which are discussed on the podcast starting around 19:31. Topics Covered 2:00 minute mark - Investing strategy 7:00 - How much does balance sheet factor in to your analysis? 8:15 - What have you learned during your investing career that you find valuable right now? 10:30 - Lessons from the past year 13:45 - Something that scares you about markets/portfolio right now? 15:15 - Something that gives you confidence? 17:00 - Are you concerned that "safer" stocks could also be punished in a recession related sell-off? 19:30 - Favorite ideas. ( DELL ) ( WAB ) ( CMCSA )

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Marketplace Roundtable #53: Finding Cash Flow Compounders And When To Buy, With Thomas Lott is an episode from SA Marketplace Roundtable.

This episode is 30:35 long.

This episode was published on Sep 30, 2019.

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