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PowerPoint Presentation - Financial Activist Club


  • pg 1
									Selecting Stocks: Going to the
        Grocery Store
Two Types of Stock Analysis:
Fundamental and Technical

Fundamental analysis               Technical Analysis anticipates
evaluates a company's              future investor demand by
financial strength and             analyzing trends in price
potential for increasing profits   movement and volume
Fundamental Analyst: What to look for

-What determines a
company's long term stock
value? Answer: Business
   a. Management, team
strengths, operating efficiency
   b. External Factors:
economy, industry
Fundamental Analysis: What else to assess?
-Balance Sheet, Income Statement
  a. SEC forces companies to display these records in 10K
and 10Q reports

-Revenue: Company Income
-Earnings: Profits after Expenses are paid off

Different Accounting Methods:
-Pro Forma earnings: measures company's results had
certain events not occurred
-Free Cash Flow: All expenses are subtracted from
income sources (Investments, revenues, etc.)
-EBITDA: (Earnings before interest, taxes, depreciation, and
Google's Balance Sheet / Income
Statement (GOOG)

Technical Analysis: It's all in the Charts

-Looks for precise time to get in the market

-Looks at law of supply and demand
   a. Uses technical data to predict if a stock's price is to rise or

-Uses meaningful patterns or trends in the stock price that
may signal future movements in price
   Ex. Huge increases in volume may indicate large institutional
investments, which may increase the price
   Ex. Typical price change patterns may indicate a
typical market behavior (dip, peak, etc.)
Fundamental vs Technical Wrap up

Fundamental looks at a       Technical looks at price
stock's financial strength   movement patterns and
through accounting records   supply and demand factors to
and core earnings            predict whether a stock will
                             grow or lose in value
Other Rules of Thumb for
-PE Ratio
-Dividend Yields
-PEG Ratio
-Dividend Yields
-Institutional Ownership
-Earnings Yield/Annual Growth
Aspects of a Stock: P/E Ratio

-Defined as
(Price per share / Earnings
per share)

-What does this imply?
   a. Higher P/E indicates
costlier stock (Paying more
for each unit of income)
     Dividend Yields

 - It is the dividend paid paid - If a company has a high P/E
 last year over the current      ratio, then they pay little in
 share price.                    dividends.
 - Reciprocal of the
 Price/Dividend ratio.
 - If the stock paid out 5$ last
 year and current price is 50$
 dollars, what percent is the
 dividend yield?
Earnings Yield
- Earnings yield is the          The earnings yield can be
quotient of earnings per         used to compare the earnings
share divided by the share       of a stock, sector or the
price.                           whole market against bond
- The earnings yield is quoted
as a percentage, allowing an
easy comparison to going
bond rates.
Earnings Growth

- Earning growth is the annual    Depending on the competitive
rate of growth from               situation, the rates will decline
investments.                      at some time.
- So, generally the greater the   Non- competitive- 1 year
growth, the better!               Solid company - 5 years
- However, high growth rates      Company with high barriers of
are impossible to maintain        entry - 10 years
indefinitely.                     *approximations
Institutional Ownership

How much are institutions like
mutual funds, pension funds,
and hedge funds pouring into
certain stocks?

Pro: Can influence the
demand and therefore price
of a stock by "marketing"

Con: Such big institutions,
when selling, can lead to
excessive supply of stock
End of this week (Going to be used for
the August 11 Class)

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