The Beauty of Taiwan

         wpr101’s Investing Strategy

         Wpr101’s 2024 year end review

         I am using a combination of getting ideas from other investors and doing my own screens. This board is of course a great source of ideas. I also check the IBD 50 list maybe once a month to see what new names come up there, along with top movers on some days. I understand that screens are not too popular on this board, but I believe this is a result of how many investors use screens to try and base their investments solely off the screen results.

         The way I use screens is both basic and effective for finding potentially interesting stocks. The two screens I currently use are companies with 40% yoy revenue growth in their last quarter, and then 40% yoy revenue growth plus profitability on both EBITDA and net income. The first screen simply looks for the revenue growth rate I am targeting, and the second looks for that revenue growth with profitability. I am usually more interested in companies which can drive both revenue and profits, although some companies place less an emphasis on earnings as they scale up.

         Just FYI that a lot of screeners make it exceptionally hard to configure this yoy revenue growth rate, although on Koyfin you can find it under “CAGR (1Y FQ) total revenues (FQ)”. Then I have some other very basic guardrails like market cap greater than 500M and is listed on Nasdaq or NYSE.

         These screens are only used to gather symbols which could be interesting or companies I haven’t heard of. My next step is to check the companies financials, and I’m looking for accelerations in those numbers of revenue, EBITDA and net income. The more geometric the acceleration the better, and if you plotted the numbers on a graph it would show a steep curve up. For example my top holding ALAB has these revenue numbers over the last year,

11M → 37M → 65M → 77M → 113M

         Once I have validated the numbers check out and meet the standard I am looking for then I’ll do some quick product research. This is usually done with the help of AI tools like Perplexity or ChatGPT where I’ll ask questions about what they do and try to understand the business model. I’ll also gather some quick info on the company to make sure I don’t overlook something obvious. These items include: debt and cash balance, number of employees, founded date, ipo date and HQ location.

         After the product research I will print out the company’s last transcript and underline interesting parts with a colored pen. I’ll put a “?” next something that could be a yellow flag, and a “??” next to anything that is a red flag. Likewise I’ll put an “!” next to something which really makes me want to invest like an accelerating financial metric, or some impressive user growth statistic. At the end of reading through I’ll put some notes on the back of the transcript for my final takeaways.

         The vast majority of the time I will have some clear reasons not to invest, but maybe 1 in 20 times I’ll find something worth starting a position in. I am willing to go in a small starter position even if I do not fully understand the company. Other times I may start a bigger position if I know the company’s product well like Reddit, or if I’ve looked at the company before and know a fair amount about it. I find that creating a small starter position acts as a forcing function to learn more about the company, until either I increase my allocation or discover a reason to sell.