Fundamental Analysis Techniques

[bullmarket]

no problem tech/a

I see that you still resort to childish and immature name calling when someone posts something you don't like - but no matter, as I said the more aggresive someone is towards those that don't blindly believe them the more confident I am there is a hidden agenda behind their posts

You also seem to be under some delusion that I (or anyone else for that matter) am under some sort of obligation to blindly believe anything you post. The simple undeniable fact is that I am not. and so I will continue to exercise my 100% right to not believe any unsubstantiated claims especially in chat rooms - and I don't see why you take my choosing to not believe everything I see personally. It's a well established fact over at Commsec and elsewhere that I don't blindly believe unsubstantiated claims in chat rooms.

You might claim you have substantiated claims but not to me you haven't because I have no way of knowing who is actually sitting at the tech/a keyboard at any given time just as you have no way of knowing who is sitting at the bullmarket keyboard at any time...it's as simple as that

So I will just continue to post what I like when I like and if you don't like it then why not put me on on your ignore list as I suggested recently......it's a simple solution for you

Have a relaxing evening and I'll see you in the soup.

cheers

bullmarket

 

[tech/a]

No problems Bulldust.
Its really Alan Greenspan---damn the cats out!
And the Deli Lama

 

[tech/a]

You might claim you have substantiated claims but not to me you haven't because I have no way of knowing who is actually sitting at the tech/a keyboard at any given time just as you have no way of knowing who is sitting at the bullmarket keyboard at any time...it's as simple as that

Actually I'm interested in this statement.

How does it have any bearing on substantiating records available from Reefcap? Everything is from their site not something I have typed up myself.
Its a download of archives.

I believe you invest in companies?
I suppose you do a background check on the accountant/s.

Hmm interesting thinking I fail to see relevance.
Other than attempting (enthusiastically) to discredit the credible.

 

[nizar]

You also seem to be under some delusion that I (or anyone else for that matter) am under some sort of obligation to blindly believe anything you post.

Sorry to butt in, but tech/a doesnt seem to be under some delusion to me.

Who said u must believe everything you read?

His record is enviable, but achievable with experience im sure. If he wouldve told me he just picked 20 stocks and they all did well then i wouldve doubted him but he used stop losses and he has made losses along the way, as every trader would have.

Look at his number of posts and his reputation on this forum. They speak for themselves.

Notice that when he posted that record, u were the only one to reply negatively. Were u the only one to think he might have made it up? No, several people may have thought this. But they kept their thoughts to themselves. Maybe u should consider that. If you dont have anything good to say, good meaning inquisitive, constructive, etc, then maybe best to keep 2 yourself.

Have a lovely evening and best of luck in your endeavours, Bullmarket.

 

[It's Snake Pliskin]

Sorry to butt in, but tech/a doesnt seem to be under some delusion to me.

Who said u must believe everything you read?

His record is enviable, but achievable with experience im sure. If he wouldve told me he just picked 20 stocks and they all did well then i wouldve doubted him but he used stop losses and he has made losses along the way, as every trader would have.

Look at his number of posts and his reputation on this forum. They speak for themselves.

Notice that when he posted that record, u were the only one to reply negatively. Were u the only one to think he might have made it up? No, several people may have thought this. But they kept their thoughts to themselves. Maybe u should consider that. If you dont have anything good to say, good meaning inquisitive, constructive, etc, then maybe best to keep 2 yourself.

Have a lovely evening and best of luck in your endeavours, Bullmarket.

Yes and he seems to go beyond generalising and sprouting on about "Trading with a plan" by kendall....blah, blah..

 

[TheRage]

Sorry to dig up an old thread. I am obviously new here and have a question regarding the NPV technique described at the beggining of this thread. I was just wondering how a 1 for 3 share offer or a company buyback would affect the NPV model. More specifically does this dilute the models effectiveness. While I undertand the model is looking at my required rate of return what I am really looking for is a method for determining the fair value of a stock. I appreciate that a stocks value is a multifacited entity but does anyone have any other mathmatical ways of determining the value of stocks from a fundamental perspective. I am a value investor if this is pertainent.
Cheers
Ryan

 

[Realist]

Sorry to dig up an old thread. I am obviously new here and have a question regarding the NPV technique described at the beggining of this thread. I was just wondering how a 1 for 3 share offer or a company buyback would affect the NPV model. More specifically does this dilute the models effectiveness. While I undertand the model is looking at my required rate of return what I am really looking for is a method for determining the fair value of a stock. I appreciate that a stocks value is a multifacited entity but does anyone have any other mathmatical ways of determining the value of stocks from a fundamental perspective. I am a value investor if this is pertainent.
Cheers
Ryan

Well if a company has a 1 for 3 share offer it should in theory not change the value of the company.

A buyback should not change the value of a company either - because they are paying for shares with their money.

Both however should change the value of the shares though.

If you get my drift. 10 shares of $1 are worth the same as 2 shares of $5.

but does anyone have any other mathmatical ways of determining the value of stocks from a fundamental perspective

In purely financial terms for large multinationals that make consistent profits...

Add up the last 5 years Net Profit after tax times that by 4 (maybe adjust a little to (add in assets minus liabilities)). That should give you a very approximate Market Cap - which you then divide by the number of shares outstanding to get the share price.

This will work for a bank or large company for instance, but a Uranium explorer - no hope, a whole different ball game. Don't even start on that.

 

[brendan87]

Hi everyone. I dabble in a bit of fundamental analysis and it seems just as daunting as tech. when starting out. I've picked a solid portfolio of growth companies that has done really well (I'm positioned for 3+ year 'buy and hold' strategy) and here are the broad criteria I use to pick stocks:

- EPS growth > 20% (and expected to remain >20%)
- EBIT margins that are increasing (good indication that management is strong)
- High EBIT margins (depends on what sectors you like, but 30%+ is good, because it means the company can easily turn sales/revenue into profits). In the company reports - I like to see NPAT and EBIT increasing faster than revenues, that way if revenues drop due to exogenous factors, your earnings can still increase.
- They have to have a growth strategy: I like growth by acquisition. But I'm also in to growth via overseas expansion (anything with the word China works) as well. Growth by product innovation/invention is good (if backed by cash flows frome xisting products). Growth by LBO ?? lol
- I like to see high gearing ratios (what ever you feel comfortable with, as if it were your own business, which really it is when you buy shares because you take ownership) - it means the company knows how to use its capital, has a growth plan and remember the risk / reward potential of gearing! It's also a good idea to research where the funds are being employed (a major acquisition or expansion ?) and also the interest cover (so you can assess whether you think the company is overstretched)

- This point is more a reflection of my personal strategy, but maybe other can relate to it. I look for higher than average PE ratios and lower div. yields when finding growth stocks. A GOOD stock with a high PE (look historial as well) you will notice has probably always traded above the market and still produced stellar returns. Some high PE stocks are priced that way because they have a history of delivering (and exceeding expectations). I remember reading some surprising statistics in a book I had about how statistically, high PE stocks perform better over the long-term and an anaylsis was done that excluded stocks with PEs over 40 (in the US) and the hypothetical portfolio severely underperformed. It's also a sign investors have confidence in the board to deliver....may be unfounded...and it may bite you later if they don't deliver....but I don't touch low PE stocks because they say don't give off confidence and the prospect of growth. But that's just my opinion. Onto div. yeilds...another one of my beliefs is that high yeild stocks say to investors "we can give you a better return by sending you a cheque than reinvesting in our business" - another negative signal in my opinion. Low div. yeild means the plough-back from earnings is high and is likely to generate future growth that will exceed the value to shareholder of a dividend today. By declaring lower dividends and increasing plough-back the board is showing confidence that even given the time value of money and investors required returns - they think you are still going to be better off by improving and growing the business internally than simply throwing money at shareholders. This is a positive signal.

This philisophy is great for l-t holds on growth companies. It's not to say I don't buy companies for short-term trades that don't meet those criteria, I've made plenty of money on stocks with high-yields/low PEs etc that were favourable placed in the market at a given time - but I wouldn't consider making a long-term committment of my hard-earned in these companies.

But fundamental analysis is a valuable tool and like others in the topic - shouldnt be used in isolation either. Market dynamics and tech. analsysis can be complimentary to fund. analsysis. Just like tech. it comes down to what you know and remember the best trading/investing systems are not always the most complex. But understanding the world of fund. analysis has inspired me to undertake a Bachelor of Commerce in Accounting so I'm hoping my depth of knowledge will grow and I can make much more informed investment decisions that the few indicators I use at the moment. But I think the important thing is to make sure you really understand the fund. indicators (what drives them, compare them between firms and sectors, look at averages, what they're commonly used for, and what they can tell you about the business.... and the 'positive' and 'negative' "signals" that I like to refer to before you start making decisions based on them.

 

[hongwong]

I use Fundamental Analysis to stock pick.

If the books told the whole story about the books, I believe accountants would be the richest people in the world.

I like to go one step more and do investigation into the stock
I am in. Really look into the business.

I would even do this if I was a "chartist", which I am trying to learn.