All else being equal, the return you'll earn on any investment comes down to two main things: the length of time you hold it, and the price you pay. Every Fool knows that when it comes to investing, all else isn't equal, of course. Nonetheless, those two points are well worth bearing in mind as you go about the business of stock shopping for fun and profit.
And that's particularly true, I'd argue, when it comes to the question of price.
Most of us, after all, at least intend to be buy-to-hold types when we stake out a position in a stock we like. Trouble is, our "like" sometimes kindles into a full-blown romance, with the upshot being that we fall in love with a stock's "story" and let emotion cloud our judgment when it comes to assessing valuations and growth prospects.
Still, fan though I am, I wouldn't touch Google's shares, not at a price that adds up to a price-to-earnings ratio that hovers near 60.
When it comes to investing in individual stocks, I'm a big fan of companies with an intrinsic value that clocks in well above their stock prices. Beyond that, I also like firms with lengthy track records of generating plenty of free cash flow (FCF) -- cash from operations minus capital expenditures -- and whose shares have taken a beating.
Google passes the beaten-up test, it's true, but the company's FCF track record is too short -- particularly when the market boasts such compelling longer-haul contenders as Amgen
And while the 52-week discount isn't quite as steep, IBM
Why are you waiting?
To be sure, just because a company makes it through a set of quantitative screens doesn't mean it's a slam-dunk investment. There's more to ferreting out value than just number crunching, after all, which is why I'm a big fan of my colleague Philip Durell's Inside Value newsletter service.
Each month, Philip whittles down the investment universe to just those companies that meet his stringent quantitative requirements and measure up when it comes to more qualitative factors (such as managerial acumen and a laser-like focus on creating value for shareholders) as well.
Shall we dance?
If that sounds like a compelling strategic two-step, I encourage you to take Inside Value for a test drive. It won't cost a thing for a full 30 days, a stretch of time you can use to peruse Philip's complete list of recommendations, every column inch of financial advice he's offered subscribers, and the service's members-only discussion boards, too. So click here to grab your guest pass and to learn how to cherry-pick great investments from the ranks of the market's great companies.
At the time of publication, Shannon Zimmerman didn't own any of the securities mentioned above. UnitedHealth is both an Inside Value and Stock Advisor pick. You can check out the Fool's strict disclosure policy by clicking righthere.