Australian (ASX) Stock Market Forum

Take me under your wing V2.0

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luutzu said:
I'm not an accountant, no. But I have written an accounting software... so accounting for investors?

An investor, in looking at the financial statements, is not really there to value the business precisely.

No one can value a large business precisely, not even the executives, and definitely not the board. This is because the value of a business always move... it is organic, grow and shrinks.

But more importantly, as you know, being an accountant... the data are estimates... in large corporations, larger estimates. Estimates that are often delayed.

But aside from that, a business' value is about where it'll be years from now.

SO already there's two approach to valuing the business - its book value, assuming it's all up to date and approximately about right and honestly estimated. Then there's the future prospects.. i.e. putting those assets to use, expanding into new markets... the likelihood of such possibilities bringing the cash back given the financial position, the product, competitors etc.

Can't value it based on future possibilities of world domination; shouldn't really go for the book value/asset pricing only approach either... So it'll depend on the business you're looking at.

But it is possible to value a business from its financials. Some companies' position made it possible to be more confident about the estimate; some you just don't want to touch.

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Here's how I value Sirtex in three charts.

Remember Sirtex? Its CEO allegedly [ASIC reckons he did it too] trade on insider info. The new products they're planning to expand into "fail" because it didn't extend life in other cancer patient.

From about $20 to $25 its share price drop to $16, then soon after to $10.50s in matter of months?

View attachment 90151

Above show that Sirtex is not going to go broke. Its cash and receivables alone more than meet coming liabilities. Inventory is produced on demand.

Compare that to Dick Smith and you can kinda see that Dick is in serious trouble if they don't move a large chunk of their inventory.


View attachment 90152

My favourite chart. Things moving in the right direction. Much like Wal-Mart.
So you know it's a good business.

Other factors also backed this up... Returns, margins etc.

What about the price?

View attachment 90153

Below a conservative estimate of modest/inflation-pegged "growth" of 2.5% a year.

And that's on the reported earnings during years where they've spent abnormally on R&D, testing to expand their drugs into other areas. With the tests coming to and end, normalised earnings will be higher.

That does not include the planned expansion into China and other markets.

But assuming none of that happened... can the business remain as it is, in its current form and be worth the investment being asked?


View attachment 90154
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I'm not an Accountant, I couldn't bare the thought of doing the CA or CPA programs. My initial work taught me that. I know Accountants who have walked away from Accounting due to pressure to sign off on illegalities.

You're a smart cookie Luu, I'll have to take the time to fully digest your post, time I don't currently have. Can you give me a link to your investing software pls. So you incorporate both Fundamental and Technical analysis? Thanks!
 
Darc knight if you need to take time to digest Luu's post what about me (the novice) i got more chance of speaking with aliens than understand that stuff
 
Darc Knight said:
I'm not an Accountant, I couldn't bare the thought of doing the CA or CPA programs. My initial work taught me that. I know Accountants who have walked away from Accounting due to pressure to sign off on illegalities.

You're a smart cookie Luu, I'll have to take the time to fully digest your post, time I don't currently have. Can you give me a link to your investing software pls. So you incorporate both Fundamental and Technical analysis? Thanks!
Click to expand...

Would be tough signing off on else someone else will.

From a couple experience I have at big corps., I wouldn't be comfortable signing off on their excel spreadsheet "accounting" either.

App not up yet. Minor clean up and a mail server config should see it live soon. A couple of weeks I reckon.

It's free too, so that should be good. Or not, as it's free. :D

Well, people need to enter the financial data, which isn't hard but it can be intimidating and "unnecessary" if you don't want to do it. But I reckon I've put enough incentives for users who care to to enter the data.

Taking on the big data boys Batman. :cool:

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It's technical in the sense that I use charts to visualise the metrics. Lots of it. About 49 charts in total.

Fundamental in that the metrics came from the financial statements. But it's not like most others who just buy pre-packaged data and pretty it up through a few charts... those are ok to screen the stocks for shortlisting, but I wouldn't want to put money out based on their calculation though.
 
pearcey29 said:
Darc knight if you need to take time to digest Luu's post what about me (the novice) i got more chance of speaking with aliens than understand that stuff
Click to expand...

Haha. Stay tuned Mate. Tech/A and Luu are some of the smartest folk around when it comes to investing, and they are covering the whole spectrum of investing - Fundamental and Technical analysis.
 
Darc Knight said:
Haha. Stay tuned Mate. Tech/A and Luu are some of the smartest folk around when it comes to investing, and they are covering the whole spectrum of investing - Fundamental and Technical analysis.
Click to expand...
yer iv noticed a lot of very smart people on here I am just way out of me depth i think
 
pearcey29 said:
Darc knight if you need to take time to digest Luu's post what about me (the novice) i got more chance of speaking with aliens than understand that stuff
Click to expand...

You can ask and I'll try to help explain it.

But that's why in the app I put tips and help with each chart. Will add and improve on them at later stages but yea, most normal people do not need to memorise what every accounting term is. We just need to know what it mean, what it tries to show about the business.

There's only 3 financial statements in the report. Well, the changes in equity is just a detailed version of the equity in the balance sheet.

But the 3 are pretty straight forward once you break it down into bits.

Then once the bits are slowly presented... an idiot like me could even understand it.

That and you also got the old case studies to compare to. e.g. Dick Smith collapsed... Wal Mart didn't. Is Woolworth, or other retailers, showing similar pattern. I guess that's being technical and of course once you read the financial statements etc., more context and better judgment, but from a purely financial aspect, it's pretty straight forward.

E.g. Financial Position... the Balance Sheet....

Current Liabilities vs Current assets.

Current mean it's due, or coming, within 12 months.

Current liabilities include payables owed to suppliers, loans due within 12 months etc.;

Current Assets are the asset that's expected to turn into cash within 12 months. So it include cash at banks, receipts payable for goods/services delivered, inventory etc.

IF current assets can barely meet current liabilities... the business is not in a good position. Chances are it'll either have to borrow more cash, raise more cash or go bankrupt. Or sell most of its inventory at prices as marked etc.

So once broken down, things become a lot clearer.

But as business is dynamic, factors such as the economy, household debt, bad luck, good fortune... Or some idiot executive with plans for empire building wanting to takeover.
 
tech/a said:
Ann

If you could search for any metric or characteristics

What would they be and why?
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Ann said:
Depends on what I am trying to achieve tech/a.
Click to expand...

tech/a said:
Thought that would be a profit!
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This is true if I am charting for myself and my own portfolio, however I may just want to chart a Commodity or a chart of a penny dreadful someone may have commented upon, so I would look in different ways for different things. So no, it is not all about profit when I chart.

If you are wanting to know my trading plan then it goes this way....

First I choose a theme for myself, one which interests me and a way to focus on certain stocks. My last three main themes over the last couple of decades has been health stocks, then stocks that were adjuncts to mining companies, then my most recent theme has been stocks that offered a DRP (Dividend Re-investment Plan). Sometimes I will trade something out of the theme but not often. When I have closed out of all my stocks, I then look for another theme.

I am a long term investor and try to ride a stock as long as I can. I take a very long term view of a stock (twenty years or as much as is charted) and work out if it is going up, down or sideways by drawing support and resistance lines on a weekly chart. I only buy stocks if they are going up or have come from a long sideways consolidation and risen above my drawn resistance lines. I check the PVI (Positive Volume Index) to see if the punters are excited, the RSI to see it isn't into overbought territory and the MACD to make sure there isn't an approaching cross down and I also check volumes for steadiness. If all those signals are looking good and all else is looking positive I will enter into the trade.

I have a 30 week simple MA and a trailing stop of 10.2% of weekly close. If the stock breaks below a support line and falls below the MA and hits the stop then I do a manual close out of the stock. I never re-enter that stock even if it rises back up again.

If I am looking at Commodities (which I don't trade) I draw chart patterns, RSI to check how over/under bought it is but mostly I look at the COTs (Commitment of Traders) to see if they are contracting or expanding.

If I am looking at charting someone's penny dreadful I will take a shorter term view, maybe a year or two, draw supports and resistances, PVI, RSI, MACD and Volume, no MAs. I will also take a glance at the overall sector to give me an indication of what is potentially likely as a fall or a rise.
Hope that covers what you wanted to know tech/a. How about you?



pearcey29 said:
Darc knight if you need to take time to digest Luu's post what about me (the novice) i got more chance of speaking with aliens than understand that stuff
Click to expand...

pearcey29, there is a lot of jargon flying around and there seems like so much information, an understanding will come to you in time. Try to keep it as simple as possible for yourself. Learn to chart, work out if you want to do short term trading or longer term. Choose your stocks with a theme of some kind, maybe mining, health, energy...whatever. Make a trading plan for yourself. Test it out on the Trading Game here. Don't rush to throw your money into the market, you may never see it again! :)
 
luutzu said:
I'm not an accountant, no. But I have written an accounting software... so accounting for investors?

An investor, in looking at the financial statements, is not really there to value the business precisely.

No one can value a large business precisely, not even the executives, and definitely not the board. This is because the value of a business always move... it is organic, grow and shrinks.

But more importantly, as you know, being an accountant... the data are estimates... in large corporations, larger estimates. Estimates that are often delayed.

But aside from that, a business' value is about where it'll be years from now.

SO already there's two approach to valuing the business - its book value, assuming it's all up to date and approximately about right and honestly estimated. Then there's the future prospects.. i.e. putting those assets to use, expanding into new markets... the likelihood of such possibilities bringing the cash back given the financial position, the product, competitors etc.

Can't value it based on future possibilities of world domination; shouldn't really go for the book value/asset pricing only approach either... So it'll depend on the business you're looking at.

But it is possible to value a business from its financials. Some companies' position made it possible to be more confident about the estimate; some you just don't want to touch.

-----------

Here's how I value Sirtex in three charts.

Remember Sirtex? Its CEO allegedly [ASIC reckons he did it too] trade on insider info. The new products they're planning to expand into "fail" because it didn't extend life in other cancer patient.

From about $20 to $25 its share price drop to $16, then soon after to $10.50s in matter of months?

View attachment 90151

Above show that Sirtex is not going to go broke. Its cash and receivables alone more than meet coming liabilities. Inventory is produced on demand.

Compare that to Dick Smith and you can kinda see that Dick is in serious trouble if they don't move a large chunk of their inventory.


View attachment 90152

My favourite chart. Things moving in the right direction. Much like Wal-Mart.
So you know it's a good business.

Other factors also backed this up... Returns, margins etc.

What about the price?

View attachment 90153

Below a conservative estimate of modest/inflation-pegged "growth" of 2.5% a year.

And that's on the reported earnings during years where they've spent abnormally on R&D, testing to expand their drugs into other areas. With the tests coming to and end, normalised earnings will be higher.

That does not include the planned expansion into China and other markets.

But assuming none of that happened... can the business remain as it is, in its current form and be worth the investment being asked?


View attachment 90154
Click to expand...

This is brilliant. This is how Accountants talk about Fin Statements being like a story book,
 
tech/a said:
Thanks that gets me right up to date.
Me short term futures DAX
Click to expand...
Interesting, the DAX looks like it has a fully formed head and shoulders pattern coming from December 2016. It must be getting harder to trade.
 
Ann said:
Interesting, the DAX looks like it has a fully formed head and shoulders pattern coming from December 2016. It must be getting harder to trade.
Click to expand...
Ann commodities, futures and fx arn't like stocks, have a go with a demo account and see how you do?
 
Pearcey29 go read some of the threads by Peter2 or tech/a they actually show you what is involved in actually trading and how much work is needed to be a consistent profitable trader.
 
To date, you have only been exposed to [those] traders that trade price. Price you have to trade directionally. You [could] also trade [price] through trading volatility. By doing so, price becomes market neutral.

One [major] advantage to trading volatility, rather than price, is that volatility has [historically] firmer boundaries as compared to price, which can help when deciding on value inputs.

You will need to venture into the world of options to do so. I've never traded Australian options, only US, so I have no idea if its actually possible in Australia. Seek out Wayne on this question.

jog on
duc
 
Ann said:
Interesting, the DAX looks like it has a fully formed head and shoulders pattern coming from December 2016. It must be getting harder to trade.
Click to expand...

Always the same.
Trade long and short.
Only trade for a couple of hrs
A couple of days a week
 
Is it really necessary for an Investor to have a thorough understanding of Fundamental and Technical analysis when using investing software nowadays. Obviously a thorough understanding helps but is it really necessary with software?
 
Darc Knight said:
Is it really necessary for an Investor to have a thorough understanding of Fundamental and Technical analysis when using investing software nowadays. Obviously a thorough understanding helps but is it really necessary with software?
Click to expand...

Sun Tzu says, to know oneself and know the enemy will ensure complete victory. To know oneself but not the enemy, half half; To know neither and you're screwed. :D

Of the (five) conditions for success, one is to know the field of battle.

The stock market has many players. Among them are the managed fund, the index fund, the traders.

What do they have in common? Trend trading.

So when a stock drop by a certain amount, the index funds will offload their holdings; that often further pushes the stock down... if it goes below the top 200 or 300 etc., others will sell out of it for no other reason than their portfolio just don't do "small, micro, cap".

So there's momentum.

How does an average investor possibly take advantage of that?

My opinion is that they ought to have a pretty damn good idea of what the approximate value of the stock is. Then depends on sentiment, how much of a bargain the price depresses to etc., might be able to further advantage from market action rather than fundamental alone.

But without a reasonable idea of the company's value, it's hard to take full advantage of the market/technical aspect.

Check out my app...

www.danginvestor.com

It's in testing mode... I'll switch it on and off, mostly off... but it's working.

Just remember your login and password as they're encrypted and I haven't yet done the reminder.

Check out the videos I made. It should give an overview of what it's all about.
 
Darc Knight said:
7 day 100℅ money back guarantee. Very good Luu!
It's all done online via the site @luutzu ?
Click to expand...

The app itself is free. No money or any fee to use it.

But it is also a research exchange platform where users can sell [or give away] research they've done. Namely, the financial statement data.. and if they care to share their notes or research, they can also include that in the listing too.

The idea is, you would only buy the research after you've looked and read about it elsewhere, want to take a closer look but doesn't have time or doesn't care to enter the financial data.

If other members have done the research and wish to list a copy on the Exchange, then you can download it, pay the price the user wanted for it. Price can be free or a few bucks. Up to the user.

I simply get 25% commission on each successful sales. The seller get 75%, payable each month.

Kinda like eBay for investment research.


So the 7-Day money back is for instances where the listed research is not complete or falsely advertised.

But that should be rare as I've designed the charts shown in the listing showing live data with documentation (if any) attached. From that audit alone, users would know what's in the listing they're about to buy.
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I guess the premise here is that the data that's available out there aren't that good. And of the ones that are useful you can get them for free so why pay for them.

Most people wouldn't bother entering financial statements if the business doesn't already look interesting to them.

So when it's listed... it's quite interesting and might be worth a much closer look.
 
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