Stock Purchase Guidelines

The STORY:

Management

Compensation in line with company size and profits
Mix of age and experience
Pay tied to performance
% of ownership

Company Board of Directors

Compensation
Company outsiders vs. insiders
Mix of industries and skills 

History

How long have they been in business?
How long have they been public? (5 years) 
Do they have a global perspective?
Do they have a proprietory product or some other unique quality?

• What is total debt? (less than 33%)
• Is pre-tax profit and return on equity holding, increasing, decreasing? (increasing)
• Is P/E ratio less than 5yr average?
• Is P/E ratio less than earnings growth?
• What is the price to sales/PE ratio?
• Does the price of the stock have an upside/downside ratio of 3 to I or better
• What is beta? (between .9 to 1.1)
• What is the Value Line timeliness rank? (1 or 2)
• What is the Value Line safety rank? (1 or 2)

Other Considerations:

• What is the earnings growth expectation?

  small company 15% or higher
  medium sized company 10% - 15%
  large company at least 10%

   

• Is the company in the top 1/3 of its industry?
• Where is the company stock price in relation to the 52 week high/low?
• Would this company enhance BAB's portfolio diversity?

The WATCH LIST:

• Under what circumstances would we consider this company's stock for purchase?

Favorable press releases
Lower stock price $__________
Turnaround company
Change in management