Key Messages
The Falcon Method: Unlocking The Secrets Of Investing In Company Shares
No matter your stake in the financial game, it pays to invest wisely.
Whether you’re looking to make your wealth grow or just save up for retirement, The FALCON Method is here to help.
It focuses on the single most lucrative asset class – stocks – and provides investors with concrete measurements to evaluate different companies by ranking the best on a set of equations.
The FALCON Method is an investment method you can bank on.
It’s based upon an undeniable logic: companies are like black boxes, and by understanding their inner workings, we gain insight into which ones make the best investments.
By following these simple principles as outlined in this guide, you’ll be well on your way to financial independence and prosperity.
In short, if you want reliable guidance for more successful stock investments, The FALCON Method puts the power in your hands!
Warren Buffett’S Three Investment Categories, And Why Productive Assets Are His Favorite
When it comes to different types of investments, stocks are a standout choice.
Warren Buffett, one of the world’s most successful investors, revealed in a 2011 letter to his shareholders that stocks are superior compared to currency-based investments, unproductive assets, and other productive assets.
Currency-based investments like bonds can be unreliable because they rely on the value of the national currency not suffering from inflation; these assets don’t generate ancillary income either.
Unproductive assets like commodities won’t make additional cash while you own them; your only hope is to sell them back for more than what you originally paid for them.
By contrast, stocks – also known as productive assets – are a far more reliable option.
Stocks represent partial ownership in a company and can bring about steady long-term income via dividends paid out annually.
In addition, stockholders still retain the underlying value of their shares which can be sold on the market at any time.
Evaluating Companies: The Black Box Metaphor Explained
In order to effectively invest in shares you need to understand how companies generate and use cash.
This is a crucial part of making solid stock investments and should not be overlooked.
A great way to think about it is in terms of the black box metaphor provided by David van Knapp in his book Sensible Stock Investing.
He suggests that a firm can be thought of as a black box with input and output pipes connected to it.
You may not be aware of what goes on inside, but the pipes provide insight into how companies generate money.
The input pipes include revenue from selling products or services, and equity sales when issuing new shares.
It’s important to track these because the issuance of new shares means that the value of previously existing ones will ultimately be diluted.
Output pipes are equally as important since they tell you where the profits are ending up.
Examples are ongoing expenses, debt payback, acquisitions, taxes on profits and more importantly dividends payments being made to shareholders, share buybacks which reduce the amount of outstanding shares increasing their value, and retained earnings which are used for company growth and expansion.
Ultimately understanding how companies generate and use cash is essential for prudent investing in stocks if you want maximum returns from your investments..
The Falcon Method: A Better Way To Invest For Long-Term Financial Security And Success
The FALCON Method advocates a buy and hold approach to investing, which greatly increases the chances of success.
This method focuses on buying stocks in well-known companies with quality fundamentals and holding on to them for the long-term, while relying on dividend payouts and anticipating an increase in the stock’s value over time.
This strategy limits psychological errors and keeps investors from making emotionally charged decisions because there is no need for constant buying and selling of stocks.
The FALCON Method also ensures that all stocks which survive the filtering process are above-average investment opportunities due to its clear structure.
Overall, this method minimizes costly mistakes caused by human bias and provides more consistent returns than other classic quant investment models.
If you want to maximize your portfolio growth over a longer period of time, then you should look into the FALCON Method as it recommends investing in reliable, household name companies well known for their quality performance.
The Falcon Method: Select Companies With A Long History Of Consistent Dividend Payouts For Greater Returns
The FALCON Method is a strategy designed to help investors find long-term stock investments that keep paying dividends consistently.
The very first step is to select a group of top-quality companies.
To do this, the method focuses on companies that have paid dividends for at least 20 years without reducing them.
What makes dividend payments so important? They are much more reliable than most reports found on corporate financial statements; other items, like revenue and cash flow figures, can be distorted by unethical activities or false accounting information.
In fact, the Dividend Aristocrats – the top 500 companies in the S&P index– all stand out for having increased dividend payments for at least 25 consecutive years.
However, the FALCON Method takes a more flexible approach and allows for some fluctuation over time in favor of investing in a company’s future potential, understanding that not all dividend payment records are perfect.
This gives investors access to stocks outside of the S&P index and expands their horizons for finding good investments with consistent returns.
The Key To Investing Success: Bravery And Knowledge In The Face Of Market Fluctuations
The FALCON Method encourages investors to hunt for the best bargains by looking for companies whose stock prices are lower than their underlying value.
This process starts with determining a company’s true “intrinsic” value, based on its assets, financial health and future potential.
By comparing this figure to the current market price of a company’s shares, investors can identify when stocks are significantly discounted relative to their true value – what is referred to as buying “value.”
These purchases allow investors to obtain quality investments at a fraction of their actual worth, thereby securing long-term profits.
However, it requires patience and dedication in order to find opportunities like these within the markets!
By following The FALCON Method – Fundamentally Analysed Long-Term Cashflow On Numbers – you can become better informed about when and where these deals exist.
The second step of the method focuses on identifying stocks that can be bought cheaply: those where the share price has been lowered because of panic or hype in the stock market.
By recognizing times when market sentiment is pessimistic or euphoric (respectively), smart investors can snag fantastic discounts for quality investments.
It is essential not to get swept up in emotions; rather, one should take full advantage of them by studying how different markets behave so that profitable decisions can be made – because while others focus on fear or greed, shrewd investors look out for long-term profit margins!
The Falcon Method Narrows Down The Search For Companies With Financial Strength
The third step in the FALCON Method for stock investing is creating reliable filters to refine your shortlisted stocks.
The method uses three key financial indicators to help you do this: dividend yield, free cash flow yield and shareholder yield.
When looking at dividend yield, it’s calculated by dividing the amount of dividends a stock is expected to pay in the next year by its current price.
For example, if one share of Microsoft costs $10 and that share pays $1 in the upcoming year, its dividend yield is 0.1 or 10 percent.
Free cash flow yield measures the relationship between a company’s free cash flow (the money left over after paying essential operational costs) and its current market price per share by taking a company’s free cash flow per share figure then dividing it by the current market price of one share.
Finally, shareholder yield looks at how much money a company sends back to investors through dividends and share buybacks.
To calculate it, add together how much was spent on dividends and buybacks for a given period then subtract the value of new shares issued.
Divide whatever figure remains by the corporation’s market capitalization — or all existing shares combined — and you have its shareholder yield percentage!
Using these three Key Performance Indicators or KPIs (dividend yield, free cash flow yield & shareholder yields) as filters can narrow down which companies from your list are best suited for investment from an advanced financial standpoint.
Definitely define minimum values here but don’t set them so high they make it difficult to pass all three tests – even moderately-valued companies should have some chance of passing!
The Falcon Method: A Definitive Guide To Weighted Multifactor Ranking Of Stocks
The fourth step of the FALCON Method is to take all the stocks that passed the previous three steps and pick the cream of the crop by using something called Weighted Multifactor Ranking.
This means that you will rank these stocks based on multiple factors, as well as give each factor an appropriate weighting.
For example, you could rank two companies – Stock A and Stock B- on three factors: dividend yield, free cash flow yield and shareholder yield.
You would then assign a weight to each factor (like 33.3%), and then use this to calculate a score for both stocks by multiplying each factor by its weight, and then adding up all their scores together.
But there’s more!
The FALCON Method suggests creating a modified version of the Chowder Rule as another factor in your ranking.
This involves adding a stock’s dividend yield with the percentage its dividend has grown in either one, three or five years; with different requirements pending if its initial dividend yield is greater or lesser than 3%.
At this stage, you have picked those stocks that are right for you after careful examination and analysis — now you just have to weigh up which ones out of these survivors are truly “the best of the best”!
The Falcon Method: Leveraging Powerful Financial Indicators For Precision Investing
The fifth step in the FALCON Method is where you incorporate your own judgment.
To do this, you need to pay attention to some key indicators like the ROIC (Return on Invested Capital) and the overall trading pattern of a stock.
The ROIC indicates how efficient a company is at allocating its resources to profitable activities.
The higher the ROIC, the better.
It’s important to monitor it so that you know if your investments are working or not.
You also want to be careful about investing in stocks that are cyclical, or ones whose price swings wildly.
Keep an eye out for these stocks over a long period of time; big peaks and troughs could mean that your capital is at risk since there’s no way of telling when it might crash again.
In conclusion, using qualitative judgment as a final confirmation before investing is ideal with the FALCON Method; after steps one through four have done their job in identifying great investment opportunities for us, we can use our own knowledge and experience to make sure we’re making the right decision.
Wrap Up
The FALCON Method is a clear and concise investing strategy, with a strong focus on rigorous company analysis and a buy-and-hold philosophy.
Its well structured process zeroes in on long-term dividend payers, with a set of filters to reduce the chances of making subpar investments.
If you follow the right steps and use the recommended financial indicators, you can give yourself the best possible chance to grow your wealth and build a passive income.
If you want to put what you’ve just learned into practice, start by researching famous indexes like the Dow Jones Industrial Average or the S&P 500.
Pull out all companies that have been paying dividends in the long run and create your own list.
The key is to analyze this data carefully and make sure that every move you make is backed up by facts.
With that approach, there are no reasons why you won’t be successful!
