Last week we made the initial company cuts from our long list of possible high-growth investments, with the condition that Fools could argue for having companies reinstated on the list if they wanted. Four companies, listed below, have returned to the list.
There is a catch, however. Given that community Fools argued for the return of these companies and since we already have so many companies to analyze, we're going to request that Fools on the discussion board analyze these four companies as part of our study. If they don't, we won't. If they do, we will, too -- using much of their work as a guide. This will be collective learning.
The next cuts on the way
We made our first cuts based on expected earnings per share growth rates and market capitalization. Companies with five-year growth rate estimates below 25% or with market valuations above $50 billion were cut -- like bread at a bakery.
Soon we'll look at sales growth. We want to see at least 20% annual revenue growth. Then we'll go into other numbers to make more cuts -- like gross margin, debt, cash flow, and working capital. But, before all of that happens, we're going to make cuts that will be controversial. The next cuts will be subjective.
Our list below is far too long for us in Drip Port to analyze and come to know each company well. Instead, we must work from some existing knowledge base. This means that we're going to look at each line of business and cut the companies with businesses we don't understand at all today, and that we believe we would have a hard time understanding even given much work -- not to mention the trouble we would have projecting the future of certain businesses.
This is clearly a subjective process. However, that's what investing is! A business that we understand you may not understand at all, nor want to, and vice versa. Each of us, hopefully, invests in the businesses that we understand best and think are most attractive. Everyone has different favorites.
So, before our subjective cuts over the next week get you ruffled, remember that Drip Port is just one example of how a few Fools invest their money. We demonstrate the process in public so that others may learn from what we do, both good and bad, and apply any lessons to their own decision making. We are not "the model" to follow. There isn't any such model that works for everyone. We do hope that we are a good model to learn by, however.
Below is the list as it stands today, with three brand-new additions from the community and four other companies reinstated. Over the next week, we'll look at each company's business here at Fool HQ and then we'll come back to you with our first cuts, explaining why we're cutting swaths of businesses from our list, if we do. We've provided the full list of companies today and in the past so that you may pursue any you wish, regardless of what we cut for personal, subjective reasons.
