When selecting stocks to cover, I look at all the following qualities of the company: the experience and reputation of the management team and board of directors, the robustness of its corporate control (including accounting and financial control system), the level and sustainability of demand on its products/service, the extent and sustainability of its competitive advantage, barrier to entry in the industry, short to long term growth potential of the industry, short to long term growth potential of the company, health and cleanness of its balance sheet, insider/institutional ownership and trading activities, major short-term events and misconceptions that are causing its stock price to be unduly valued at current level (note that it can be to both side - under and over valuation), and finally the potential for these events and misconceptions to subside in the near future.
I give my best effort to initiate an upside opinion only on stocks that are superior on most of the aforementioned qualities. On the other hand, I give me best effort to initiate downside opinions only on stocks that are inferior on most of these aspects. In terms of rating, although my analyses are long-term focused (having in mind that I would be comfortable staying long or short on a stock for more than one year), I adopt the industry standard investment time frame of 12 months when assigning a rating to a stock to avoid confusions to the readers.
Below is definitions of the ratings I give:
Ultra Strong Buy: It is my view that the fair market value of a stock is higher than its current price by a huge extent.
Strong Buy: It is my view that the fair market value of a stock is higher than its current price by a large extent.
Buy: It is my view that the fair market value of a stock is higher than its current price by a moderate extent.
Neutral / No Opinion: It is my view that a stock is currently fairly valued or there not sufficient basis for me to form a target price at the time of coverage initiation or update.
Sell: It is my view that the fair market value of a stock is lower than its current price by a moderate extent.
Strong Sell: It is my view that the fair market value of a stock is lower than its current price by a large extent.
Ultra Strong Sell: It is my view that the fair market value of a stock is lower than its current price by a huge extent.
I also give price target to each stock I cover. My price target has a uniform time frame of 3 to 12 months (i.e. I believe somewhere within one year the target price very likely will be reached).
