[Business] Part 6: Trimming the Fat

Going from an initial investment prospect group of 246 to 13 potential winners

Hi Readers,

We’ve made it to Part 6 🎊

For those of you who have been following the series thus far, you are surely more well-versed in all things Energy — and more importantly — investing. Most importantly, thou

By the way, SPY 0.00%↑ is down 3% YTD and XLU 0.00%↑ (our Energy proxy) is up 1.5%. For you math gurus, that’s a 4.5% spread on the Energy industry vs. the market YTD. Did we not call it?

In Part 6, I will be covering:

1. Part 6: Trimming the Fat

2. [Part 7 Preview]: Winner Winner Chicken Dinner

Because the feedback I have received on the series has been overwhelmingly positive, I’m excited to announce that I will be continuing this type of series in a similar capacity going forward! (Notably, the last part of our series was the most viewed post on my Substack! See below.)

Also, in case you missed the previous parts in the series — get up to speed now:

[Business] Part 5: Separating the Best from the Rest

Seize the Moment: How my "Finding the Perfect Investment for 2025" Aligns with Current Energy Market Opportunities

Ready to find a winner? 🥇

Trimming the Fat

In part 5, I mentioned some of the “custom metrics” I planned to use to evaluate the companies in our list. In a simple sense, these metrics were mostly to evaluate the future outlook for the company and trend the company was on: Increasing Earnings, Forward CAGR Increasing, Increasing Margins, and Forward Metrics lower.

(more on how these metrics were calculated and used below)

📌 We left off at a list of 72 companies.

After exporting our screened list to Google Sheets, adding these custom metrics and filtering for companies that met just two of these additional metrics (namely Accelerating earnings & Forward EV/EBITDA <), the list was sharply narrowed down to just 13 companies — and the list is pictured below.

(Tickers: AROC 0.00%↑ , USAC 0.00%↑ , FTI 0.00%↑ , BKR 0.00%↑ , NGS 0.00%↑ , EMR 0.00%↑ , FLS 0.00%↑ , ITRI 0.00%↑ , OGE 0.00%↑ , EVRG 0.00%↑ , ORA 0.00%↑ , 2074 (Gotion), GEV 0.00%↑)

There’s no secret to this list but our hard work in identifying the industries that were poised to succeed in the given macro and industry environments and a little bit of knowledge on what the metrics mean and why they matter — which we covered in an earlier part. Anyone could put this together, and now you know how.

But, let’s get into how these metrics were calculated…

There’s a Method to the Madness

Five metrics were used in evaluating companies beyond their core financials. As mentioned, these are largely being applied to establish a trend for each company in the list and to be confident in future outlook of the company.

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Before getting into that though, a quick flashback to all of the metrics we were initially using to screen… 🤯

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The five metrics used were trying to answer the following questions:

💰 Are they getting better over time?

💰 Are they getting worse over time?

💰 Are they projected to continue to grow 1,2,3 years down the road?

Note that for our purposes, I used 1Y, 3Y, and 5Y time horizons. Even the 5Y time horizon was pushing it for the purposes of this investment, but you could use alternative time horizons depending on your investing goals.

📌 The Metrics

1. Increasing Earnings Growth (Trend)

2. 3Y>2Y>1Y Forward EBITDA CAGR (Future Outlook)

3. Increasing Margins (Trend)

4. Forward P/E < TTM P/E (Future Outlook)

5. Forward EV/EBITDA < TTM EV/EBITDA (Future Outlook)

The forward valuation ratios weren’t used in tandem for the purposes of this screening, and I don’t believe they should be if you were going to use these for your own purposes. I used my forward P/E ratio as more of sanity check for the EV/EBITDA ratio that I had.

And there you have it! 💥

Our “custom metrics” that allow us to delve a layer deeper.

Can you see these being effective for your investing purposes? What did we miss?

If the metrics aren’t clear for you, check out Part 4 where we covered the basic components of the above 👇

[Business] Part 4: Finding the Perfect Investment For 2025

Wrapping Up

This piece recapped how we screened the Energy industry down to just 13 companies from an original list of 246.

1️⃣ The first step was applying just two additional “custom metrics” — Increasing Earnings Growth & Forward EV/EBITDA < TTM EBITDA.

2️⃣ The second step was applying a few more: Increasing Forward EBITDA Growth, Increasing Margins, and a Forward P/E ratio as a “Check” for our initial EV/EBITDA.

And that was it! I think you all could manage that. Use the tools outlined in my Personal stack, namely, FinChat for the screening portion. Use this guide. Pair them together and repeat for industries of interest.

I found the PERFECT investing stack so you don't have to...

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In the next part of this series, we will find our paragon — the one company that has been rigorously screened and vetted to allow us to be confident in investing our money into it & letting it ride.

The piece will contain:

1. A handful of company analysis reports 📝 ending with a recommendation (narrowing our group of 13 even further)

2. Our investment winner 🎊 — and my walkthrough in doing a final evaluation of the qualitative aspects of the company (leadership, sentiment, etc.)

3. The downloadable spreadsheet through which I conducted my analysis 📊 📑

I’m wildly excited.

Comment something you learned from this post, share your excitement for Part 7, and start engaging with your amalgamation community.

In learning,