# DrBourse FA Help for Beginners



## DrBourse (31 July 2021)

*Anyone that plays in the "ASX Sandpit" needs to understand that the following is how a lot of unmentionables make their living, unfortunately "off the masses".......*
During the year and in particular during Feb & Aug each year the “The Guesstimate Seasons” begin, Financial Results have been published and digested by all the Experts, where those Expert Broking Houses and Analysts try to Guess what the upcoming Targets will be, (& also what next year will produce) for varying Companies.
I would suggest Extreme Caution, as history has shown that most of these Guesstimates are WRONG.
It's a Game that most Expert Analysts, Broking Houses & Economists play – they are consistently wrong - nearly every year on nearly every stock they "Over Guesstimate Projected Earnings", then when they realise they were wrong yet again, they issue a downgrade within a few months (or Years) that conveniently meets the then current price.
Their Inflated Guesstimates continually lead the Sheep up the garden path as they force the prices up, then the same Expert Analyst’s, Broking Houses & Economists do a downgrade, so they can buy when the Sheep have to sell --- SOME OF THESE ANALYSTS ARE REALLY JUST LICENSED RAMPERS --- Grrrrrrrrrrr.
Admittedly some Broking Houses receive Briefings directly from some Companies, the problem with that is that the Broking houses then somehow manage to ‘embellish’ those briefing figures to ridiculous levels, they manage to use words like, ‘we anticipate, we calculate, we project, etc, etc.
Broking Houses can’t be seen to just relay the Co Briefings ‘word for word’ as the Companies quote them – that would render the Brokers Reports as “useless repetition”.

IMO, Brokers Exist only to make you "BROKER"......


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## DrBourse (31 July 2021)

The Public NEVER get to see the Actual/Correct & Up-to-Date Financials from any Company - the best we can get is from the Co itself, and those figures are only what the Co wants us to see, and by the time we get to see them they are usually 2 or 3 months "Out of Date". 
Any other Analysis on a Co's financials usually include some of that Analysts own "Guesstimates" on what the published Financials actually mean - each one uses poetic licence to embellish their own individual publications - Analysts can’t be seen to just relay the Co Briefings ‘word for word’ as the Companies quote them – that would render the Brokers Reports/Analysis  as “useless repetition”.

What you need to do is work directly from the Co's Published Financials, the best way to get those are from each Co's web site.

Then you need to calculate your own Ratios, Margin of Safety etc..

A suggestion for you is to check out the Top 20 Shareholders...Banks & Financial Institutions are pretty good at analysing Financials - If you see that a Co has Banks & Financial Institutions in that Top 20, list then you can be pretty sure that the Co's Financials are better than Good, usually Very Good to Excellent.

Banks & Financial Institutions do not buy on Rumours, Ramping or outlandish Media and Analysts Reports.


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## DrBourse (31 July 2021)

*Two words I look for in any announcement are - "Audited or Unaudited"....*
In other words, did some junior clerk collate the data then pass it on to the scribe, who passed it on to someone else to publish it all as a price sensitive announcement and as an Unaudited press release....Did the CEO or any members of the Board verify the data.... if so why is that not stated in the press release.....Most Co Execs shy away from such accountable comments....
Unaudited Announcements that do not carry Senior Co Execs Endorsements are suspect IMO.....

*OR.....*

Has the data been properly Audited by a Reputable Company......

Like the old addage said - "If it sounds too good to be true etc etc"......
We need PROOF and ACCOUNTABILITY.....What we don't need is a bunch of unsubstantiated data......


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## DrBourse (31 July 2021)

Balance Sheets are too complicated for most people to understand……
There are numerous people who expertly analyze these Balance Sheets….
Their analysis is available from various Magazines, Newspapers & Internet Sites…..
So, I have built up a “Matrix” that quickly helps me to identify the Good, the Bad & the Ugly…...
This Matrix and it’s Ratio Grading's help me identify Companies that meet my selection criteria……
You may need to amend some of these numbers to suit your level of tolerance……
There are dozens of expert opinions for “Margin of Safety (MOS) & RATIO's”, Just Google whatever it is you want to understand…..
The Matrix replaces page 161 in my original Manual from the late 1990's....


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## rederob (31 July 2021)

DrBourse said:


> *Two words I look for in any announcement are - "Audited or Unaudited"....*
> In other words, did some junior clerk collate the data then pass it on to the scribe, who passed it on to someone else to publish it all as a price sensitive announcement and as an Unaudited press release....Did the CEO or any members of the Board verify the data.... if so why is that not stated in the press release.....Most Co Execs shy away from such accountable comments....
> Unaudited Announcements that do not carry Senior Co Execs Endorsements are suspect IMO.....
> 
> ...



Audit fees can be prohibitive - BHP paid $16.7M last year - so I don't share that concern.
Also, company releases *must *carry the name of the person authorising it.  People giving materially false or misleading information may be prosecuted for committing a criminal offence under the Corporations Act, so in the absence of competing information we have nothing better to rely on.
Furthermore, ASX continuous disclosure requirements for companies are nowadays onerous, so any information concerning it that a reasonable person would expect to have a material effect on the price or value of its securities must immediately be advised to the ASX.
There's a daily updated thread on price sensitive announcements started by @barney that should be essential reading for investors.
People wanting to be thorough could use your matrix to determine if an announcement materially changed their expectations for any particular company.


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## DrBourse (1 August 2021)

Contrarians are people that challenge conventional market wisdom by applying intellectual rigour and plain common sense to theories often used to explain share price movements – Contrarians are also the ones who buy stocks that are ‘out of favour’ according to some well defined fundamental measures, such as low PE, low PB or high Div Yield.


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## DrBourse (1 August 2021)

Earnings Stability simply means a company is able to produce a fairly predictable pattern of earnings. That could be a desirable record of solid gains. EPS Stability Rating is a measure of consistency in earnings growth. Like many ratings, it runs on a 1 to 99 scale.(where 1 is excellent & 99 is Terrible) BUT anything below 25 is OK......
Technically speaking, earnings stability is a percentage value showing one standard deviation of the variability around the trend line fitted through three to five years of earnings history. Therefore, the lower the number, the more stable the company's earnings history. A company that reports consistent earnings growth of, say, 25-27 percent each quarter over three to five years will have an earnings stability near 1 (%) while a company that reports earnings varying from 5 percent in one quarter to 85 percent in another to -15 percent in yet another will have a substantially higher earnings stability value. Keep in mind that our proprietary Earnings Per Share Rating factors in earnings stability.

For more info just Google “Earnings Stability Definition” OR “Earnings Stability Formula”.


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## DrBourse (1 August 2021)

The Cash Flow per share ratio tells - in theory - how much actual cash the company has generated, per share, from its operations….
“The Ratio is not exactly a true measure of Cash Flow. It is simply the company's depreciation & Amortisation figures for the year added to the after tax profit, and then divided by a weighted average of the number of shares.”…
Depreciation and amortisation are expenses that do not actually utilise cash, so can be added back to after tax profit to give a better of indication of the company's actual Cash Flow….
By contrast, a true cash flow - including such items as newly raised capital and money received from the sale of assets - would require quite complex calculations based on the company's statement of cash flows….
However, many analysts use the ratio because it is easy to calculate and it is certainly a useful guide to how much funding the company has available from its operations….
A prominent Portfolio Manager said:  When looking for cheap stocks, we look for free future cash flows and companies with pricing power that have control of what profits they make….
An indicator of impending cash-flow problems is the Current Ratio, which is Current Assets divided by Current Liab's….
Current Assets can be converted to Cash within 12 mths, while Current Liab's usually are due within 12 mths….
If there are more Current Liab' s than Current Assets, Cash Flow could be crunched….
Some investors prefer companies with a Current Ratio of more than 2, but companies with relatively short payment cycles - for example, retailers - may have lower Current Ratios….
Do extra research when the current ratio falls below one….
Even better is the Quick Ratio, which excludes Inventory. Inventory can be a potential Landmine….
A smaller retailer, for example may be overstocked with clothing it can't sell, but avoids writing it off….
An Inventory blowout relative to sales is another useful indicator of potential problems….
Look at Current & Quick Ratio's for companies over several years to determine Cash Flow trends….
Net cash from operating activities, divided by the diluted weighted average number of ordinary shares outstanding. Net cash flow represents cash from operating activities. It includes tax, but does not include capital expenditure. Free cash flow can be derived by subtracting capex per share from cash flow per share….


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## DrBourse (1 August 2021)

Buffett suggests that a Co’s PE should be 20% below the ‘Maximum Market PE’  - that narrows the field down quite a bit……..
The formula for the “Max Mkt PE” is - 100 div by the current 10 Yr Bond Rate = Max Mkt PE…..


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## DrBourse (1 August 2021)

One of the hardest figures to calculate when you are working on a Companys IV, is the "Maximum Required Rate of Return" or "The Investor's Required Return"..... This mythical percentage is published from time to time by Reputable Analysts (yeah right)....
OR....
You could calculate it for yourself....The 5/8/18 Weekend Australian quotes "Forecast EPS" for the ASX200 for 2018 as 5.9%, & for 2019 as 7.8%, & for 2020 as 9.8%.....
SO - Here we go -....
IMO, The Investor's Required Return is a number that takes into account firstly, an expected rate of return.....
This is a compounded growth rate, or Forecast EPS of 5.9%, which is arguably a rate of return people are willing to recieve .....
The Investor's Required Return should also take inflation into account, which according to statistics, has averaged 3% over several hundred years.....Comsec tells us that the Inflation Rate is 1.9% as at 17 Aug 2018....
Finally, The Investor's Required Return should also take into account a compensation for risk - what is known as the 'Equity Risk Premium'.....
If this additional rate is, say, 3%, then the Investors Required Return is:- 5.9% + 1.9% + 3% = 10.8%.....
THEN .....
To calculate our Investors Required Return Start with 10.8% for 2018, (& maybe 11% for 2019, then 11.5% for 2020, & 12% for 2021)......
ADD 0.5% for slightly Above Average Debt,....
ADD 1% for Very High Debt,....
ADD 1% for Foreign Countries Political Interference & Unrest,....
ADD 1% for Average Write Downs or Losses,....
ADD 2% for Very High Write Downs or Losses,....
DEDUCT 0.5% for Below Average Debt,....
DEDUCT 1% for No Debt,....
DEDUCT 0.5% for Dominant Companys,....
DEDUCT 0.5% for Stable Long Standing Companys.....
Hope you can understand all that...


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## DrBourse (1 August 2021)

I do not use a Conventionally Accepted Stop Loss or Trailing Stop Loss System…I feel that those systems belong to the Longer Term Investors…Once I have in my opinion, enough Signals/Signs from my Tools of Trade, I will act immediately…For example if a Bearish Candle Pattern and/or my Indicators suggest that a pullback or downtrend is imminent I will follow those signals and exit the Trade immediately…If I were to use a % Stop Loss System (of say 2%) and my Tools of Trade gave me enough signals to exit for say 0.5%, I would be crazy to hold and watch any small loss be increased just because that “% Stop Loss System” told me I had to wait till my losses reached that magical 2% - it would be easier to just give some money away…Admittedly I sometimes exit a trade early – but I prefer to be cautious – and if my Tools of Trade suggest continued uptrend then I can easily re-enter the Trade.
"You can assist whatever Stop Loss System you use by "Correct Stock Selection" & "Correct $$ Management" - for example - If you invest $50k in Penny Dreadful’s like LKO shares you will probably activate your Stop Loss System immediately, and if you are not quick enough you could lose the lot - On the other hand $50k invested in BHP shares would be a safer trade, less risk, probably less profit but better protection for your capital“.
IMO, Traders should not get too involved with Stop Loss points - I do not use a Conventionally Accepted Stop Loss or Trailing Stop Loss System….I feel that those systems belong to the Longer Term Investors….Once I have in my opinion, enough Signals/Signs from my Tools of Trade, I will act immediately….For example if a Bearish Candle Pattern and/or my Indicators suggest that a pullback or downtrend is imminent I will follow those signals and exit the Trade immediately....If I were to use a % Stop Loss System (of say 2%) and my Tools of Trade gave me enough signals to exit for say 0.5%, I would be crazy to hold and watch any small loss be increased just because that “% Stop Loss System” told me I had to wait till my losses reached that magical 2% - it would be easier to just give some money away....Admittedly I sometimes exit a trade early – but I prefer to be cautious – and if my Tools of Trade suggest continued uptrend then I can easily re-enter the Trade....- the idea is to trade when there is a trade to be made, and even then you should 'Play the Trade' (like playing a Fish), you should not trade the $$$'s - get the trades right and the $$$'s will automatically follow.
Most Traders use strict Stop Loss systems I primarily use my Indicators as my initial Stop Loss System, when they turn Negative, I jump - the other system is a "TSL" = Trailing Stop Loss of a $/c value - so had everybody been using some sort of Stop Loss they would have a small Trading Loss to use as a Tax Ded'n - 
"You can assist whatever Stop Loss System you use by "Correct Stock Selection" & "Correct $$ Management" - for example - If you invest $50k in LKO shares you will probably activate your Stop Loss System immediately, and if you are not quick enough you could lose the lot - On the other hand $50k invested in BHP shares would be a safer trade, less risk, probably less profit but better protection for your capital".

Suggest that you try this site http://www.incrediblecharts.com/ , lots of FREE Educational Info...On the Incredible Charts Home page, top right hand side, do a search for ‘Stop Loss’... 
Also see my snapshots 112, 116 & 160...Then do a Google Search for Stop Loss - dozens of good explanations there...


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## DrBourse (1 August 2021)

A lot of Day Traders prefer to use alarms rather than Stop Loss Triggers.....  Most of the Software Trading Platforms (Metastock, Incredible Charts, etc) have an alarm system that may be of use to you..... I have an average of 20-25 alarms that I review Daily....  You can usually set these alarms on a SP, an Open, a Close, a High, etc, some can be set for release of an announcement - lots of other parameters may be available depending on the program.... the obvious drawback with alarms is that you have to be online when the alarm is triggered for it to be of any value...


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## galumay (1 August 2021)

All seems to be very complicated and long winded, I guess each investor needs to find a process they have conviction in, but that wouldn't work for me.

I can usually tell within 2 minutes of looking at a business whether its potentially investible (most are not), I would do a few hours research & analysis before taking a starting position if it looks like the business is investible based on my criteria.

There are some really good tools out there for helping with the process, I use Uncle Stock for screening and QuickFS is an invaluable tool for the quick assessment of investibility.

I developed my own spreadsheet for my process, its got much simpler over time, I work out ROIIC over at least 5 years, a quick and dirty FCF DCF to give me a range of valuation, some inversions/reverse engineering to understand what assumptions are needed for growth to underpin current price and what FCF is assumed in current price. It also checks margins, FCF yield and earnings yield. It all fits on one easy to use sheet.

EDIT - more posts made while i was writing this, as a long term investor I dont use any form of TA or stop losses etc, they make no sense for a fundamental investor IMO. (I am aware there are some investors that do find combining TA & FA works for them, it just makes no sense to me so I dont do it)


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## rederob (1 August 2021)

galumay said:


> All seems to be very complicated and long winded, I guess each investor needs to find a process they have conviction in, but that wouldn't work for me.
> 
> I can usually tell within 2 minutes of looking at a business whether its potentially investible (most are not), I would do a few hours research & analysis before taking a starting position if it looks like the business is investible based on my criteria.
> 
> ...



It's good that @DrBourse has a thread for beginners, but as you say, it's a bit long winded and rather one sided.
Given neither you nor I are beginners, we can only say what we have found to work for us, and that it doesn't involve market gymnastics.

So on topic I will propose a real life example of FA relating to contrarian investing.
REIT's are out of favour and generally have not recovered at the rate of most of the rest of the market.
REITs, like most market sectors are cyclical.
Contrarian *investing *is a bet against the prevailing market trend with a view to value (via increasing profit) returning.
Given that property prices typically increase over time, their lease rates will too, the reliability of the cycle to deliver a return is pretty good.
Choosing Cromwell as the stock we see this:


Keeping it simple, CMW is trading below its 2013 price, but now offers a stable dividend despite the pandemic.
Assuming a cycle rebound in years ahead, a +$1.30 target is in sight, representing an increase of over 40 cents/share (or 45%).
Given a current dividend yield of 8% and an NTA value of $1.00 any significant downside is likely to be well supported considering CMW has held above 80 cents throughout most of the pandemic.
There are many other metrics to consider, but the ones I look at most are those that could lead to CMW going belly up.  As it stands CMW has no problem covering debt, and the rest depends on all the unknowns that can equally apply to every stock you look at.


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## tech/a (1 August 2021)

galumay said:


> All seems to be very complicated and long winded, I guess each investor needs to find a process they have conviction in, but that wouldn't work for me.
> 
> I can usually tell within 2 minutes of looking at a business whether its potentially investible (most are not), I would do a few hours research & analysis before taking a starting position if it looks like the business is investible based on my criteria.
> 
> ...




And some of us dont use and F/A at all.

There are many ways to achieve investment and profit.


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## galumay (1 August 2021)

tech/a said:


> And some of us dont use and F/A at all.
> 
> There are many ways to achieve investment and profit.




I realise that Daffy, I replied in that way because I saw he had 2 threads - one addressing FA & one addressing TA, so I was only commenting on his point about using TA with FA.


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## DrBourse (1 August 2021)

Investing on your own? Here are three *Intrinsic Value* principles to live by….
Think of stocks as real business That's what they are: part-ownership in actual companies. When you buy shares in, say, Coles (ASX: COL), you become a passive owner of that company and have a right to a portion of its future profits, as well as a slice of every warehouse, cash register and unsold potato…..
Whether you own a bakery in partnership with your brother-in-law, or you own Coles in partnership with a million other shareholders, the principle is the same - think like an owner of a business, not a gambler speculating on what the share price will do next…..
Share Price does not equal value....
Extending the bakery analogy, imagine that your brother-in-law came to you every morning with an offer: a price he would be willing to pay for your share of the business, and a price at which he would be willing to sell you his. This is exactly how the stock market works - you own a slice of a real business and get a constant stream of offers from other shareholders.
The intrinsic value of a business is a function of all the cash it will receive, discounted back into today's dollars at a suitable rate of return. The market tells you the current price people are offering to buy and sell it. There's a big difference. I can offer to sell you a $10 note for $15, but that doesn't mean the note is worth more. Share prices bounce around far more than the value of the underlying businesses because share prices are dictated, at least in the short term, by human psychology.
If you're focused on the share price, rather than the business, you're going to make silly decisions. You wouldn't do this for your bakery: you'd care about how the bakery was doing at the end of each year - how much money it made, whether a new bakery opened next door, whether it needed to borrow cash etc - than what offer price your nutty brother-in-law comes up with.
Volatile share prices are a source of opportunity: If you have a firm idea of what your bakery is worth, when the offer price undervalues it, you can increase your ownership stake, and when it's too high, you can sell. A volatile share market gives you options, nothing more. You never have to act. Benjamin Graham first explained the idea that a wild stock market was advantageous to level-headed investors in his book The Intelligent Investor. He also developed this next philosophy,  Build in a margin of safety.
No one knows what that future will look like. You can make some educated guesses based on a company's history, its competitive advantages, and forecasts about market growth and profitability. But ultimately you need to leave room for errors in your forecasts. If you do the sums and figure a company is worth $5.00 per share, that doesn’t mean you should buy aggressively when the share price hits $4.99. It might be better to wait for a wider discrepancy of 20-50% so that if something goes wrong, you aren't caught overpaying. A margin of safety won't eliminate mistakes, but it will swing the odds in your favour…..

A word of WARNING to the **FA** Newbies  - An Intrinsic Value is not a TA call - Intrinsic Value Per Share is not a call on where the Share Price will go to - Intrinsic Value is basically what the company is worth Per Share, based on the company’s published Financial Statements - Basically if the company was ‘wound up’, then each shareholder should get that Intrinsic amount - they would not necessarily get the current Share Price.......
An IV can be calculated in numerous different ways – A correct and Valid IV relies a lot on what formulas are used, such as, DCFM, DDM, DDMF, PRESVAL, RIV, IVRR, NROE, CGVI, GIVF, BIVF – and there are numerous others - MAKE SURE YOU UNDERSTAND WHICH FORMULAS ARE BEING USED and what the implications are relating to each formula...Remember the old saying, “Garbage in = Garbage out”.......
DCFM = Discount Cash Flow Method, *DDM = Dividend Discount Method*, DDMF =Dividend Discount Method (Forward Return on Equity), PRESVAL = Calculates the Present Value of the Discounted Future Cash Flow per Share, RIV = Residual Income Valuation, IVRR = Intrinsic Value by Rate of Return, NROE = Normalised Return on Equity, CGVI = Comparative Growth & Value Indicator, GIVF = Grahams IV Formula, BIVF = Buffetts Balance Sheet IV........
Each Analyst/Broker has their own versions of “how to calculate an IV”.....for example –the Morgan Stanley ModelWare is a proprietary analytic framework that helps clients uncover value, adjusting for distortions and ambiguities created by local accounting regulations....... In ModelWare, EPS adjusts for one-time events, capitalizes operating leases (where their use is significant), and converts inventory from LIFO costing to a FIFO basis. ModelWare also emphasizes the separation of operating performance of a company from its financing for a more complete view of how a company generates earnings.......

BOTTOM LINE HERE IS --- To use an IV correctly you MUST understand how it is calculated..... Personally, I have an Excel Spreadsheet that incorporates most of the above formulas...

The 1st snapshot below is the Data Entry Tab, then the next 2 snapshots show the results (by formulas), each analysis takes abt 30/45 minutes.


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## DrBourse (1 August 2021)

And here is an example of just one of those above IV Formulas (with an explanation).


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## DrBourse (1 August 2021)

Diversification is a “Nasty Word” as far as my Trading goes… 
The word Diversification should be DIWORSEIFICATION…
Diversification will usually only Limit a Traders Profits…Diversification suggests that you should try to “limit or Average Down” your losses by “Spreading your Risk” through Investing or Trading in a range of Stocks from different Indicies, Groups, etc…
Diversification, as a Theory suggests for example, that you should use a % of your cash for one stock, then you should look for another stock in a different Indicie or Group, then repeat that process until you have the required numerous stocks… 
So if you used 100% of your cash, and if you have say 10% in each of 10 different Indicies, Groups or Stocks, etc, Then half of your holdings drop in value, the other half may save your position by rising in value….. In this example the net result, in theory, could be a Zero Profit… Why on Earth would you do that, if for example, you feel that the first stock you bought was going to be very profitable, BUT, because of this ‘Magical word Diversification’ you now have to spread your Risk into stocks you may feel are not going to perform anywhere near as well as your first choice Stock… If I can only see one or two stocks that look positive for a short term trade, I will use all my available spare cash to trade those one or two stocks… 
DIVERSIFICATION IS FOR INVESTORS…. .
The problem is that diversification can be a terrible form of risk management for the average share market investor. While it works well to reduce risk in a portfolio containing multiple asset classes, it’s not effective on a portfolio containing just shares.
Many ASX investors believe that by “diversifying” their share portfolio between 8, 10 or even 15 different companies they are reducing their “risk”, but this really isn’t accurate….. 
"Wide diversification only guarantees ordinary results."  - Charlie Munger…. 
Buying multiple ASX listed companies is a great way to prevent one “bad apple” from causing a game-ending loss (although it also prevents one great stock from significantly increasing your portfolio’s return), but what happens if the whole stock market falls? The answer is simple; your portfolio’s value will also fall….


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## tech/a (1 August 2021)

galumay

Was/is just a general comment.

To be honest it seems like Doctorate is needed to trade profitability!
I *dont agree* once you find an edge and that *maybe* simply trade and risk management
your away!


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## DrBourse (1 August 2021)

As a follow up to the above Intrinsic Vales Post above, here is some more Info.

The following is Referenced from "The Warren Buffett Way" pages 35, 36, 37 & 90.

Simplistically, a company's "Intrinsic Value" could be found by estimating the earnings of the company and multiplying those by an appropriate capitalization factor. This factor, or multiplier, is influenced by the company's stability of earnings, assets, dividend policy, and financial health.

Using an Intrinsic Value approach is limited by the analyst's imprecise calculations for a co's economic future.

The concern is that an analyst's projections could be easily negated by a host of potential future factors.

Sales volume, pricing, and expenses are difficult to forecast, thus making the application of a multiplier that much more complex.

The suggestion is that a Margin of Safety could be established and that it could be used to select stocks.

The idea of Intrinsic Value is an elusive concept. It is distinct from the market's quotation price.

Originally, Intrinsic Value was thought to be the same as a company's Book Value, or the sum of it's real assets minus obligations.

However, analysts came to know that the value of a company was not only its Net Real Assets but, additionally, the value of the earnings these assets produced.


The idea is that it is not essential to determine a company's exact Intrinsic Value but, instead accept an appropriate measure or range of value.


A greater amount of a company's Intrinsic Value is the sum of measurable, quantitative factors.

A lesser amount is attributed to Quality of Management, Nature of the Business, and optimistic Growth Projections.

Fixed Assets are measurable, dividends are measurable, current earnings as well as historical earnings are measurable. Each of these factors can be demonstrated by figures and become a source of logic referrerenced by actual experience.

The overall objective of this Intrinsic Valuation Calculator is to identify stocks with a current price that is less than two-thirds of it's Projected Intrinsic Value Range.


This Intrinsic Valuation Calculator relates "Owners Earnings" to the "Current Price".

Owners Earnings is stated as:- a company's net income, plus depreciation, depletion and amortization, less the amount of capital expenditure and any additional working capital that might be needed.

Owners Earnings does not provide a precise calculation as it often requires rough estimates.


This "Estimated Intrinsic/Balance Sheet Share Price Value" is what Buffets Valuer calculates the Share Price should be (based on the PAST current Balance Sheet Figures).

So Buffet is suggesting that provided there are no Abnormal Events this is what this Company's Forward share price is valued at.

If there are Company related abnormal events they can usually be accounted for within this Valuer.

That is, I can adjust any of the "Rates or Actuals" to help reflect abnormal events.

ie:- for a Profit Warning/Downgrade we simply adjust the Growth Rate. etc..

Extra info on Intrinsic Values and how to calculate it can be found in the 1st Edition of "The Warren Buffett Way" as shown in the following attachments.


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## Warr87 (1 August 2021)

tech/a said:


> galumay
> 
> Was/is just a general comment.
> 
> ...




i'm inclined to agree with tech/a (to be fair that happens a lot, lol). you are data dumping a lot. i recommend you learn how to structure and present your ideas a bit more. appears to be more rambling, data dumping, stream of consciousness, type stuff. it's disorienting trying to read any of it. i suggest you find one of your fav trading books and try to emulate its structure, it will help.


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## frugal.rock (1 August 2021)

I think "beginners" would experience exasperation trying to understand all this...imo.
Won't comment on content, but as a beginner that has traded for 2 years, each post above for me would probably be a 4 hour lesson, first defining terms used then trying to piece together the understanding of it, before working out how to apply.
Thanks for posting it though, I personally might get to it in 10 years time, if not cremated before then.


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## Austwide (1 August 2021)

I think it's a great post.
I would never try to take it all in, just skim through it and maybe fill a few gaps and when i see anything that fits in with my style of trading study that section.
If anyone tried to use all the info, by the time you decided on what to buy it would be too late.


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## DrBourse (2 August 2021)

Hi Austwide,
That's exactly why I post as much as possible up front, most ppl then take their time to digest the info at their leisure.
Cheers.


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## DrBourse (3 August 2021)

AVERAGING DOWN - why bother chasing a Bad Trade - there are so many other opportunities out there - this is one area I totally disagree with, Averaging Down is, in effect, teaching ppl never to admit that "you have made a mistake" - BIG PROBLEM - we all get it wrong from time to time, that's what 'The Market" does - the thing we should be teaching ppl is exactly that, admit your error, take the loss, then move on, don't chase the thing, chances are that if you got it wrong once, you will get it wrong again.

Averaging Down, is to me, like burning cash, why waste more money chasing something that's gone bad - use that extra cash to buy something that's gunna rise, but make sure you USE A STOP LOSS..


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## DrBourse (3 August 2021)

Beige Book - The Fed's regional survey, known as the Beige Book for the colour of its cover...The Beige Book represents a distillation of anectdotal evidence about the economy gathered by the staff of the 12 Fed Banks, helps set the stage for the testamony by the Fed Chairman to the Congress rate-setting Federal Open Market Committee... The Beige Book is part of the Federal Open Market Committee's preparations for its meetings. The report is released two Wednesdays before each FOMC. The book is a summary of economic conditions in each of the Fed's regions. The Report is published by the Federal Reserve Board eight times each year ...The report is primarily seen as an indicator of how the Fed might act at its next meeting..


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## DrBourse (3 August 2021)

Book Value is no good for Valuing a company's Intrinsic Value - It is not uncommon to get Intrinsic Value and Book Value confused…..

The Book Value (equity) is that which appears in the balance sheet of the company and equals the assets less the liabilities......

It is easy to calculate the book value, or the equity, of a company, but when it comes to valuing a company, it is of only limited use......

Book Value (per share - net assets) represents what the shareholder owns of the company, after netting Total Liabilities from Total Assets.....

It includes both Tangible & Intangible Assets......

It's measured by dividing Shareholders Equity by the Nr of Shares Outstanding as of the EOY balance date.


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## DrBourse (3 August 2021)

*A High Debt to Equity Ratio is not always as Bad as dictated by the Old Trading Rules.*

Basically a High Debt/Equity Ratio needs to be investigated before anyone jumps to an incorrect assumption....

Debt can be a problem in some cases, But for some stocks the "Excessive Debt" is Providing Positive Returns to Shareholders....

Remember there is "Good, Productive Debt" But there is also "Bad and Unproductive Debt", the trick is identifying what is OK relative to individual companies....



Say that Debt is helping provide a 2.5% Div Yield,…..Zero Debt they would also probably have a Zero Div Yield - so theoretically a bit more Productive Debt could increase that return substantially - This is where astute directors etc come to the fore - Good Financial Management will make a company greater - Bad Financial Management will send a company broke....

Have you researched the Co Directors and the Financial Team, what is their past record like???....

Do they know what they are doing with the current ??% Debt/Equity Ratio???......

How much is Short Term Debt, How much is Long Term Debt, What are the Loan Contract Details...are there Roll Over Provisions in the Contracts....

What are the Loan % Rates, and are the Rates Competitive, or are they exorbitant????….

Look at their Balance Sheet/Financial Position, Do they have money invested that could be used to repay the debts at a minutes notice????…..

What are the Tax Implications with such a High Debt Load, Good or Bad????….

In the current interest rate environment, can higher Debt to Equity ratios be sustained.



Back in the Old Days punters like us only had those mythical % guidelines to help our decision making process - in todays environment we have endless research resources at our fingertips..



The Old Rules like the ones people refer to are just that, "Old Rules".


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## DrBourse (3 August 2021)

Dividends, Franking & Payout Ratios….

A minor suggestion for any budding Financial Analysts out there.....

Something I look for in any Analysis I do ATM is that - Franking % & Payout Ratio, should both be WELL BELOW 100%.....

50% or LESS would be ideal IMO.....

In the recent past, and for the ST Future, Companies need to retain as much of their Profits as they possibly can.....

Companies that "Payout Too Much" are flirting with serious repercussions....

Shareholders should be happy with reduced Dividends, rather than risk getting None.........

The argument that Companies need to keep Shareholders happy with large Dividends/Franking Credits just does not stand up in todays Economic Climate....

Remember to DYOR....


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## DrBourse (3 August 2021)

Earnings Stability simply means a company is able to produce a fairly predictable pattern of earnings. That could be a desirable record of solid gains. EPS Stability Rating is a measure of consistency in earnings growth. Like many ratings, it runs on a 1 to 99 scale.(where 1 is excellent & 99 is Terrible) BUT anything below 25 is OK......

Technically speaking, earnings stability is a percentage value showing one standard deviation of the variability around the trend line fitted through three to five years of earnings history. Therefore, the lower the number, the more stable the company's earnings history. A company that reports consistent earnings growth of, say, 25-27 percent each quarter over three to five years will have an earnings stability near 1 (%) while a company that reports earnings varying from 5 percent in one quarter to 85 percent in another to -15 percent in yet another will have a substantially higher earnings stability value. Keep in mind that our proprietary Earnings Per Share Rating factors in earnings stability.

For more info just Google “Earnings Stability Definition” OR “Earnings Stability Formula”.


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## DrBourse (3 August 2021)

The 3 “DrBourse Help For Beginners” forums ALL contain a series of “RANDOM POSTS” on subjects and items that may be of interest to beginners…

My intention is to lodge numerous posts to start with, then enter into “CONSTRUCTIVE DISCUSSIONS” that are geared toward assisting with beginner’s education in the various aspects of Share Trading….

These posts are not intended to be in any logically presented format….

 Experienced Traders will gain little from my posts….


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## DrBourse (8 August 2021)

Warr87 said:


> i'm inclined to agree with tech/a (to be fair that happens a lot, lol). you are data dumping a lot. i recommend you learn how to structure and present your ideas a bit more. appears to be more rambling, data dumping, stream of consciousness, type stuff. it's disorienting trying to read any of it. i suggest you find one of your fav trading books and try to emulate its structure, it will help.



Not data dumping, it’s called selective posting.

My posts usually catch the eye of “interested beginners”, you responded, so it’s obviously working.

My writing structure is fine thank you, been no problems with anything I’ve written and published so far – yes, my presentation style is a bit different, but that’s the way life is, we are all different. 
I am sorry that you feel disoriented, perhaps if you read the 3 DrBourse threads you will understand my style.

In seminars I used to give the participants comprehensive handouts at the start of the sessions, that’s basically what I’m doing now, then participants would use those notes to help them engage in discussions on those topics/subjects.


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## galumay (8 August 2021)

The whole thing has got very promotional, not sure its a good look. All of the advise is very arguable and taken at face value by a new investor, may be misleading.


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## Dona Ferentes (8 August 2021)

galumay said:


> The whole thing has _*got very promotional*_, not sure its a good look. All of the advise is very arguable and taken at face value by a new investor, may be misleading.



That was my impression from Post One.


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## StockyGuy (8 August 2021)

Don't understand the criticisms of the OP.  He's offering some basic education and tips for beginners, without charge.  I see them mainly as talking points.  It's wrong to criticise the man for not giving the ANSWER or THE GRAIL to guaranteed benchmark beating success.  Reality is most can't/won't beat the market.  It is well known.

IF he starts offering to sell advice or training, then IMO it would be appropriate to ask to see his numbers, or at least proof of trading prowess.   Seminar providers don't usually offer that, hence I don't go to a lot of seminars


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## DrBourse (8 August 2021)

HI stock Guy,
I stopped the Seminar life many years ago, went into retirement, got bored doing nothing, so after a few years I decided to reappear and give all the educational info away Free - having Reems of Handouts, Powerpoint Presentations, etc, just gathering dust seemed 2B a waste.
Thought I may be able to assist some in a small way, as I only trade as a hobby these days.

As I mentioned in another thread, "*I Don't feel the need to prove anything to anybody anymore".*

Beginners should be interested in what I have to give, unfortunately a few angry locals seem hell bent on an agressive approach, that's fine, I'm not here to discuss anything with them, anyway I can't see what they post so that takes any agro out of the equation, a 'calm retired life' is my priority now.

If I can help in some way that's fine by me, if not that's also fine by me!.
I will check these 3 DrB forums a couple of times a each week just to see if anyone wants anything from me.
Cheers....


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## Joe Blow (8 August 2021)

Please be kind everyone. Whether we agree or disagree with someone's content, or their approach, any criticism should be constructive and designed to improve the thread and raise the level of discussion. Please note that this is not directed at anyone is particular, it's just a general observation intended to assist in maintaining a friendly, constructive and inclusive atmosphere.


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## divs4ever (8 August 2021)

galumay said:


> The whole thing has got very promotional, not sure its a good look. All of the advise is very arguable and taken at face value by a new investor, may be misleading.



 but but hopefully  , they are created to provoke questions  ( i don't understand , please explain  ?? )

sorry but in my generation quality teachers HELPED you learn  , not just gave you  the magic  key to life , love and everything


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## divs4ever (8 August 2021)

PS 'taken at face value' leaves you completely vulnerable to  expert advice  ( that may or may NOT be the best way for YOU to go forward )

  sure listen to every word of that expert advice but PLEASE ask questions when you are unsure or confused


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## DrBourse (15 December 2021)

Anyone wanting to look at a Shortened Version of How Warren Calculates and uses Intrinsic Value might like to watch the following YouTube Video.



Not sure if the link below will work - if not I would suggest that you Google it, or locate it via YouTube directly.

How to Calculate the Intrinsic Value of a Stock (Full Example) - YouTube
or 
How to Calculate the Intrinsic Value of a Stock (Full Example) - YouTube.

The above proceedure is what I have been using for th past 30+ years.
Below is an example of my processes for the MND Analysis that I did on 23/11/21.

*The following Data Entry - *


*- Produces the following Analysis.*




So after studying Warrens Theories and viewing the above YouTube Vid, you too can calculate your own versions of a Co's IV.
See my IV & Book Value posts on previous pages in this forum.
Good Luck with all that.

Cheers.
DrB


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## DrBourse (16 December 2021)

DrBourse said:


> Anyone wanting to look at a Shortened Version of How Warren Calculates and uses Intrinsic Value might like to watch the following YouTube Video.
> View attachment 134312
> 
> 
> ...



Today is 16/12/21 10am - Back on 23/11/12 I posted my Analysis on MND in the "MND – Monadelphous Group" Folder, and then I reposted that analysis in my above post on 15/12/21.

The Chart below shows that punters had 2 chances to buy in @ abt $9.00.



Anyone astute enough to buy in on 29/11/21, the First opportunity, with a sell sometime the next day would have made a reasonable profit.

The second opportunity was on 6/12/21.

Cheers.
DrB


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## Rabbithop (20 December 2021)

frugal.rock said:


> I think "beginners" would experience exasperation trying to understand all this...imo.
> Won't comment on content, but as a beginner that has traded for 2 years, each post above for me would probably be a 4 hour lesson, first defining terms used then trying to piece together the understanding of it, before working out how to apply.
> Thanks for posting it though, I personally might get to it in 10 years time, if not cremated before then.



I fully agree with your comment, it takes time and how deep is your INTEREST in Trading as a hobby or livehood. 
Is it long our short term investment and finally there is always a Fund Manager to take your commission and worries away. 
A like for your last sentence, gotta laugh.😂


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## Rabbithop (20 December 2021)

Warr87 said:


> i'm inclined to agree with tech/a (to be fair that happens a lot, lol). you are data dumping a lot. i recommend you learn how to structure and present your ideas a bit more. appears to be more rambling, data dumping, stream of consciousness, type stuff. it's disorienting trying to read any of it. i suggest you find one of your fav trading books and try to emulate its structure, it will help.



Also agree with your comment, HOWEVER if you have the book written by him ( don't know whether he email it free any more), it's much easier to follow and understand his explanation if you are a newbie or someone trying to self thought like moi. Its only my opinion.
By just looking at his kind posting of "various pages" gives you blur vision and headache.


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## DrBourse (21 December 2021)

Been quite a few uneducated comments about my posting style since I rejoined ASF.

Well listen up folks.

My posts are always a little complicated, sometimes a bit vague, always Blunt and Direct, But always informative and I usually leave punters grasping to understand, but I usually leave clues within most posts - it's an old journalism trick I learnt many years ago.

I do all that ON PURPOSE.

It helps *deter* those who will never survive in the ASX Sandpit as they usually *do not* have the _*desire *_*to* *dig deeper and try to understand this complicated Profession.*

SO, I guess you could say that I'm trying to save them from giving away their "Hard Earned".

Way too many punters are looking for the "easy way into Share Trading" - NEWSFLASH folks", there's no such animal.

Those that have known me over the past 35+ years know that I am always willing to help those willing to help themselves.
I have always "given away free" Educational information, spreadsheets, publications etc to those willing to ask".

I just object to the continual unwarranted & uneducated criticism from the minority - I could just turn a Blind Eye, but thats not my style.
I could just invoke the "ignore button", but again that's not my style.

DrB.


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## rederob (22 December 2021)

DrBourse said:


> Been quite a few uneducated comments about my posting style since I rejoined ASF.



Really?
If you were a trainer (or an educator) then you would know that pedagogy is about teaching methods and styles, and that unless these match the learner you will not be particularly successful.
Many of the comments you appear to regard as "uneducated" instead have explained that your posts are not always easy to understand and that there is no apparent structure to what you are presenting.

That said, what totally confuses me is why anyone doing fundamental analysis (to the extent you have very well described at post #42) would buy one day and sell the next.  Those types of "signals" are better derived from TA and would be practised by active traders, wouldn't they?  I doubt that Warren Buffet would have done as much work as you did in that post just for a day's profit. 

It's all good and well to want to help people, and I am not for a moment doubting your good intentions, but in 3  pages of this thread you have not said what the "*purpose*" of FA is for those venturing into the stock market.  From what I can gather from post #11you are *not *proposing FA as a tool for long term term investing, which seems the antithesis of deploying the technique. 

My final comment which bears heavily on FA is that without an understanding of the stock *and *the context of the market it operates within, then a lot of work may be in vain.   On the positive side, Warren Buffet took what looked at the time as a big punt on a Chinese automaker some 12 years ago, because he saw a trend unfolding.


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## DrBourse (23 December 2021)

I wondered who was going to be the 1st assassin to crawl out of the woodwork – Congrats Rederob, You Win.

So here we go with some final ‘tit for tat’.


You mention 
“Many of the comments you appear to regard as "uneducated" instead have explained that your posts are not always easy to understand and that there is no apparent structure to what you are presenting.”

As I mentioned above, and in other posts,
“I do all that ON PURPOSE.
It helps *deter* those who will never survive in the ASX Sandpit as they usually *do not* have the *desire to* *dig deeper and try to understand this complicated Profession”.*



You mention 
"what totally confuses me"

My Reply is
It’s pretty obvious that you really are *totally confused*.



You then mention
"why anyone doing fundamental analysis (to the extent you have very well described at post #42) would buy one day and sell the next. Those types of "signals" are better derived from TA and would be practised by active traders, wouldn't they? I doubt that Warren Buffet would have done as much work as you did in that post just for a day's profit".


My Reply is
Intelligent “active traders” as you call them, should ALWAYS research FA & TA, NOT just TA – Researching just TA alone is where Beginners start their journey.

My trades, are usually below $100k, BUT often in the $300k to $500k range, and as such deserve an inordinate amount of research.

And, Buffett is primarily LT Investing, his research obviously gives him a pretty good average daily return over the LT – whereas I am ST Trading for 2 or 3 of those good daily returns.



You then mention
"in 3 pages of this thread you have not said what the "*purpose*" of FA is for those venturing into the stock market".

As I mentioned above
“I do all that ON PURPOSE.
It helps *deter* those who will never survive in the ASX Sandpit as they usually *do not* have the *desire to* *dig deeper and try to understand this complicated Profession”.*



You then mention
"a lot of work may be in vain"
&
"Warren Buffet took what looked at the time as a big punt on a Chinese automaker some 12 years ago, because he saw a trend unfolding".

My Reply is
That’s why we carry out the extensive FA research - in case you don't understand, Trends can be on any timeframe, in FA after announcements or Volume Spikes etc - and then when carrying out TA on Tick or Minute Chart over a 2 or 3 day period the Trends are as obvious as trends on Dly, Wkly, Mthly & Yrly Charts.
Extensive Research is never in vain, it is usually done in 'downtime', and once done it can very quickly be updated to cover the current time & day.
So Yes you are very confused.

=======================================================================================

Finally, I need to say Hi to Joe Blow and Skate, the attacks are relentless – the decision has been made.

DrB.


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## rederob (23 December 2021)

DrBourse said:


> I wondered who was going to be the 1st assassin to crawl out of the woodwork – Congrats Rederob, You Win.
> 
> So here we go with some final ‘tit for tat’.
> 
> ...



If you read my posts you might find that I look for evidence of the value of contributions.
I note you think this is a tit for tat, and rather than explain the purpose of FA you instead somehow think this is about "winning" something.

How can your intention be to help others when you indulge in these petty things instead of addressing the reason your thread exists.  There are countless threads at ASF about the pitfalls of being in the market *and *about helping others by offering the benefit of their investment experiences.  @Skate has had the most helpful thread in this latter regard at ASF imho for a long while, and it's exceptionally interactive.  I'm not beating his drum, just observing that your threads appear to have an expectation that readers will conform to your posting style in order to learn, yet replies to date suggest this is not happening.

Your ad hominem attack of me is unwarranted.  You have good content in the main.  True to your thread title devote your time to actually being *helpful *which, to any competent trainer/educator, involves taking on board feedback and not constantly shooting messengers.


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## DrBourse (24 January 2022)

As I’ve mentioned in previous posts, I will visit ASF every so often just to check for any *“questions from beginners”.*

There is no point in me posting anything new.

Cheers.

DrB.


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## DrBourse (3 May 2022)

DrBourse said:


> Been quite a few uneducated comments about my posting style since I rejoined ASF.
> 
> Well listen up folks.
> 
> ...



Here is something for those of you that are venturing into the “*Financial Aspects of Share Trading Analysis*” to think about.



Did you realise that there are *Three CPI* figures that you should understand?

The following links will get your journey of discovery started.



Firstly there is the “*Consumer Price Index*”.

Consumer Price Index, Australia, June 2021 | Australian Bureau of Statistics (abs.gov.au)



Then there is the “*Consumer Price Inflation*”.

Measures of Consumer Price Inflation | RBA



Then you need to understand what the “*Underlying Consumer Price Inflation Rate*” is.

Then you should find out what the “*Headline CPI*”  is, and what the "*Trimmed Mean CPI*" is. and what the "*Weighted Mean CPI*" is, *CPIX*, etc, etc.

And then you need to understand how each of the above relates to a Company's Intrinsic Value.


Happy Researching.


DrB


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## Rabbithop (3 May 2022)

Hope you are keeping well. It's been a while since your last posting. Don't let the negative comments weigh you down. Your intention and kindness are much appreciated. Keep doing your good job. We should enjoy life and have daily laughter as we don't know what tomorrow brings..


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## DrBourse (4 May 2022)

Rabbithop said:


> Hope you are keeping well. It's been a while since your last posting. Don't let the negative comments weigh you down. Your intention and kindness are much appreciated. Keep doing your good job. We should enjoy life and have daily laughter as we don't know what tomorrow brings..



Hi Rabbit,
All Good M8.
Living a quiet retired lifestyle, spending my Trading Profits, mainly on flying Overseas to join Cruises.
I usually don't bother posting much these days, Unless someone asks for my help or if I think of topics (like the CPI question) that I can just throw in front of Beginners.
I'm way past being an assassins target.
Sometimes I can see where a poster may be on, what I feel is the wrong track with their TA, then I may butt in and post something that  may help.
I usually drop in a couple of times each week, mostly for a maximum 10 minutes when I read the posts from you, GN, Skate, divs and the Qld Frog..
Cheers M8


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## DrBourse (16 August 2022)

DrBourse said:


> *Two words I look for in any announcement are - "Audited or Unaudited"....*
> In other words, did some junior clerk collate the data then pass it on to the scribe, who passed it on to someone else to publish it all as a price sensitive announcement and as an Unaudited press release....Did the CEO or any members of the Board verify the data.... if so why is that not stated in the press release.....Most Co Execs shy away from such accountable comments....
> Unaudited Announcements that do not carry Senior Co Execs Endorsements are suspect IMO.....
> 
> ...



It seems that some chatters did not  appreciate my above post, so thought I would add a 'follow-up'.

Here are a couple of recent UNAUDITED Announcements to show what beginners need to watch out for.




The following is just a small snapshot from page 2 of the RMD 11 page announcement dated 12/8/22.



Using the above RMD 10 pages of UNAUDITED Financials produces a ridiculous set of Intrinsic Values. 

Cheers.
DrB.


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## DrBourse (16 August 2022)

DrBourse said:


> It seems that some chatters did not  appreciate my above post, so thought I would add a 'follow-up'.
> 
> Here are a couple of recent UNAUDITED Announcements to show what beginners need to watch out for.
> 
> ...



A simple search of  "Forums, then Search Forums for the word Unaudited" throws up numerous other examples.


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## DrBourse (20 September 2022)

Hi divs4ever,

Wuz just trolling through some old posts and stumbled across this post of yours in an obscure forum of “Long Term Investing Book” that was started by ‘robertbanking’.



I refer to the following para of yours.



Hope you don’t mind if I Expand on your explanation in the hope of helping Beginners & Newbies.
Feel free to hit the Ignore Button if you feel I have shanghaied your original post  .

----------------------------------------------------------------------------------------------------------------------------------------------------------------------

Basically a High Debt/Equity Ratio needs to be investigated before anyone jumps to an incorrect assumption....

Debt can be a problem in some cases, But for some stocks the "Excessive Debt" is Providing Positive Returns to Shareholders....

Remember there is "Good, Productive Debt" But there is also "Bad and Unproductive Debt", the trick is identifying what is OK relative to individual companies....

Say that Debt is helping provide a 2.5% Div Yield,…..Zero Debt they would also probably have a Zero Div Yield - so theoretically a bit more Productive Debt could increase that return substantially - This is where astute directors etc come to the fore - Good Financial Management will make a company greater - Bad Financial Management will send a company broke....

Have you researched the Co Directors and the Financial Team, what is their past record like???....Do they know what they are doing with the current ??% Debt/Equity Ratio???......How much is Short Term Debt, How much is Long Term Debt, What are the Loan Contract Details...are there Roll Over Provisions in the Contracts....What are the Loan % Rates, and are the Rates Competitive, or are they exorbitant????….Look at their Balance Sheet/Financial Position, Do they have money invested that could be used to repay the debts at a minutes notice????…..

What are the Tax Implications with such a High Debt Load, Good or Bad????….

In the current interest rate environment, can higher Debt to Equity ratios be sustained.

Back in the Old Days punters like us only had those mythical % guidelines to help our decision making process - in todays environment we have endless research resources at our fingertips..

The Old Rules like the ones people refer to are just that, "Old Rules".

Basically, the Debt to Equity Ratio (D/E Ratio) is explained as “to express all company liabilities as a % of Shareholders Equity”…..

I should also mention that there are NUMEROUS different ways to calculate the D/E Ratio…

Here are a few of the options:- ….

1. Total Liabilities/Shareholder Equity multiplied by 100 = Ratio %....
2. Interest Bearing Debt/ Shareholder Equity multiplied by 100 = Ratio %....
3. Interest Bearing Debt minus Cash/ Shareholder Equity multiplied by 100 = Ratio %....
4. Shareholder Equity/Long Term Debt multiplied by 100 = Ratio %....
5. Long Term Debt plus Total Equity = Capitalisation THEN That capitalisation Total is used in the final calculation of:- Capitalisation/Long Term Debt multiplied by 100 = Ratio %....
6. Total Liabilities/Net Worth minus Intangible Assets…
7. Financial Debt/ Shareholder Funds minus Intangibles & Preference Capital…

Some Analysts show their D/E Ratio as “Gearing or Leverage Ratios”…

And there are several more ways to calculate a D/E Ratio…

Misinterpreting the D/E Ratio can be fatal to your profits – you may be missing out on a great trade because you used a D/E Ratio that was ridiculously high, when, with the correct calculation is was actually very low…

The bottom line as usual is DYOR…

Find out how your provider calculates their D/E Ratio, and then decide if that calculation is what you need to help in your analysis procedures….

The following snapshot shows just one example of what differences that can be produced – the result for each company’s D/E Ratio can differ by 100’s….



Cheers

DrB


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