If Jeremy Lefebvre had a dollar for every time he was asked: “when is the best time to buy and sell stocks?” He would be an even wealthier man than he is now. Jeremy Lefebvre started out in dead-end jobs in a small town before being able to retire a multimillionaire at the age of 25 through his successful working of the stock market. The Financial Education Youtube channel whiz kid wants to share his knowledge and experience with you. So if you don’t know your P/E ratios from your EPS then Jeremy Lefebvre is the man to explain it all to you.
Jeremy Lefebvre tracks hundreds of stocks each year but buys only a few of these. Currently, his portfolio consists of shares in only seven different companies. Just because a stock is increasing in value and following an upward trend explains Jeremy Lefebvre doesn’t always mean it will keep this momentum. Correspondingly if a stock is flatlining at a low price it doesn’t necessarily mean it will increase in value, it could also go down. Similarly just because a stock may have lost value and now seems to be flatlining doesn’t mean it is ready to turn around and increase in value. It can still just as easily keep sliding in value. As Jeremy Lefebvre describes it the old adage of buying low and selling high no longer works in the current stock market.
To state the obvious there are right times to buy a stock and there are wrong times to buy a stock. Knowing the difference can mean the difference between buying a Tesla Mk 3 with your profits or a Nissan Versa. There is no perfect strategy for this and sometimes you may get it wrong but if you follow the three steps set out below you can lower your risk and increase your chances of making a profit.
When thinking about buying stocks the first thing Jeremy Lefebvre considers is how the company he is interested in and the value of its stock will be performing in five years’ time. Jeremy Lefebvre calls this his five-year plan. The answer to the question: Will the value of this company’s stocks be the same or less than it is now in five years time; must always be absolutely NO for Jeremy Lefebvre to even consider buying. Thinking about how stocks in a company are going to perform over a five year period allows Jeremy Lefebvre to think about the business, the business overall, to think about the business trends, and to think about how the wider industry the company is a part of is going. If the company doesn’t look like it is going to perform and increase in value over the five year period then it is probably not the best time to be buying stock in that company.
Secondly, Jeremy Lefebvre likes to consider the ramifications of not being able to sell his stock in that company over a five year period. For example will not be able to sell stock over five years determine whether he makes or loses money, and how comfortable he will feel about not being able to sell his share for some reason should he want to. If you are not going to be comfortable with the answer it is probably not the right business for you to be investing in.
Lastly, Jeremy Lefebvre likes to analyze a company’s earnings going forward, that is the current earnings which can be found in the 10K, or Annual Report, against management’s projected earnings over time. The way Jeremy Lefebvre likes to do this is by calculating the P/E ratio or Forward FP/E ratio. That is how much money the company estimates it will bring in profit-wise over the next 12 months versus its market capitalization. You can calculate this one of two ways: one is net income versus market capitalization, the other is EPS (earnings per share) versus share price. This will allow you to estimate how long it will take you to make your money back after purchasing shares in the company. So, for example, if a company has an ESP of $1 per share, and it costs $10 to buy the share there is an FP/E ratio of 10. Meaning that if there are no changes over time in the ESP it will take you 10 years to recoup your purchase cost of the share.
Of course, as Jeremy Lefebvre suggests if the ESP of a company is going to remain the same over a period of 10 years it is probably not the kind of company you want to become a shareholder in unless they pay out large annual dividends to help increase your profit. The kinds of companies that Jeremy Lefebvre prefers to invest in usually have an FP/E ratio of 10 or under. However, these are companies that Jeremy Lefebvre’s research tells him are likely to greatly increase or even double their ESP in the next three to five years. So this means that the value of the company will have to increase over this period, or if it doesn’t the company may buy back shares to increase the ESP, or failing that it will pay out larger dividends to lower the FP/E ratio and boost shareholder profits that way.
Whichever way you look at it there is no perfect time as such to buy stock. In Jeremy Lefebvre’s experience working the stock market is a long term game that requires a strong work ethic and sound research. There is no instant gratification to be found here, the best results are to be gained by having a five-year plan and sticking to it. If you are interested in learning more about Jeremy Lefebvre’s strategies to make money out of the stock market please tune into his Financial Education channel on Youtube, or follow him on Instagram.