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Benchmarking When You Buy A Stock

During the rest of September and October, we'll be discussing items covered in Chapters 1 and 2 of the Stock Rover 12 month educational series available here:

Introduction to Fundamental Analysis

If your club is in need of educational topics. Why don't you join in?

Chapter 1 is just an overview of the series. Chapter 2 begins the meat of the education and club exercises starting with a few introductory topics.

Today, lets spend some time on the discussion of benchmarking.

In the chapter, they make a very fundamental point to remember when you are looking for a company to invest in:

Not only are you looking for a stock that appreciates, but you also want to find stocks that appreciate more than others.

They provide you tools to research how a company has done compared to a variety of benchmarks, including other companies, it's sector and its industry.

Here's a 10 graph of a company my club is discussing; CVS. Here's a graph of its return, compared to the return of its sector and its industry:



Looks like since 2012, CVS had managed to pull ahead of its sector and industry in performance. However, recently, it looks like things may be changing a bit. Here's a similar comparison over the last quarter:



The graphs don't tell me what to do, because purchasing a stock means assessing its future potential, not just its past. But they do show me there is something further that might need investigating. We'll want to determine if what looks like a recent buying opportunity is because of some fundamental change in the companies business that will mean it won't perform in the future as it has in the past.

The Stock Rover


has you make similar graphs for a company your club is investigating.

What companies are you researching? What do you see when you compare them to their sector or their industry or even to the performance of other companies?

Laurie Frederiksen
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