Growing Rich - Arabictrader.com

KIRK KAZANJIAN
each stock’s price-earnings ratio, see whether it pays a dividend, and
perform additional due diligence from there.”
THE BOTTOM LINE
Buy good businesses at the right prices. It is also often wise to
concentrate on large, established companies with first-class management
teams, predictable earnings, diverse product lines, pristine balance
sheets, lean expense structures, and successful international
operations.
One useful guideline for making sure you don’t overpay is to stick
with stocks you can purchase for PE multiples below the companies’
overall growth rate. In other words, look for businesses growing by
25 percent a year that you can buy for 20 times earnings. Also, try
not to purchase a stock selling for a PE multiple that’s greater than
the PE multiple of the S&P 500 index.
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