Would you choose a prefabricated house or something you designed yourself?
Take pride in what you build.
There isn't a correct answer, it's situational. Sometimes you need shelter quickly. Sometimes you want to see your vision turned into reality.
Generally when you are first starting out, working with what's readily available makes perfect sense. Why would you put a lot of time and effort into building something when you don't know what you want?
But as you grow in knowledge, you start to develop insight and preferences. You see what materials you like, you know how a certain layout would be not only beautiful but highly functional and you know the neighbourhood where it would fit in perfectly.
I think something similar applies with investment analysis.
When you start out, you work with ratios and statistics that were built by someone else. The cost is low and they do the job, hopefully.
But as you work at it and are exposed to new ideas you realize there's a whole world beyond PE ratios and dividend yields. You see how different variations of a familiar ratio would give you more insight. You learn about calculations you cannot find for free. You develop your own vision and something else:
You want confidence in what you are working with. Is the information you base your investment decisions put together correctly? If you build it yourself you’ll know it’s right.
You want to know how it's built. There are variations in even the simplest ratio. Sometimes the quick and dirty option is OK, but sometimes subtly matters.
You want information no one else has. You realize that if you rely on the same statics as everyone else you are condemned to wander forever in the world of the efficient market hypothesis.
It’s fun and rewarding to build and work with your own creations.
Creativity begets creativity. The more you work your own concepts, the more fuel you have. It unleashes further ideas.
You know where you are in your investment life cycle. If it's time to start turning your vision into reality, there's only one place to do it: INVRS.
If you work with your own investment models you likely use excel to build them, but excel
isn’t ideal for many reasons and it costs you in other ways.
First, you need good data and it isn’t just lying around in
an easy to import format.You’re either
keying it in yourself or paying money for excel downloads.
When you need data from numerous sources – price
information, data from different statements and across multiple years - you
must merge it from multiple sheets. It's an inefficient process which can lead to data corruption.
After all this data is collected and merged, models built
and tested, the net result is one statistic for one company.A stand-alone number without context has
limited use.To be meaningful, you need
to compare it to similar companies.
This is just a sample of the challenges. You need software that overcomes
these problems and is designed for investment model creation.
Surprise! This software exists, it's INVRS. You can get a free analysis report on …
NextEra had good results relative to a group of peers in a factor-based analysis.NextEra has an appealing profitability and income profile.Its price momentum looks decent, with a caveat.Its relatively small size (a small mid-cap) coupled with its industry (renewable energy) further weight the odds that this company could be a strong performer in the future.
The Analysis Overview
I created a portfolio of stocks in the alternative energy sector, looking specifically for companies with a market cap over $1B but less than $4B. This is a sweet spot that offers strong potential for growth but is also substantial enough not to be too speculative.
It's my believe that alternative energy is on the ascendance, where as fossil fuels will inevitably decline (NextEra isn't a pure play in this regard however, natural gas assets are part of its portfolio). If you share this belief and you want exposure to this market, NextEra looks like a good bet.