Fundamental Analysis

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Fundamental Analysis

• David Turner

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Would I buy this entire company?????
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What is it?

• Attempting to value a company through economic,
  financial and other qualitative and quantitative
  factors.
• Macroeconomic
• Industry-related
• Company-specific

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Macroeconomic

• What affects all companies?
• GDP, inflation, interest rates, commodity prices,
  exchange rates, etc.

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Industry-related

• Comparing company to peers on sales, price
  levels, product competition

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Company Related

• Price Ratios
• Liquidity analysis
• Current ratios
• Long-term solvency analysis
• Debt ratios
• Profitability analysis
• Ex. ROA and ROE

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Know What You Own

• Looking at more than the chart
• Examining a companys financial statements
• Reviewing corporate governance
• Visiting company locations and examining consumer
  behavior
• Investigating management

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Are revenues growing?Is the company making a
profit?How much debt do they have and can they
repay it?Management?
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Get a Feel for Management

• Listen to Conference Calls
• Look at Management Discussion and Analysis in the
  Annual Report
• Look at ownership and insider buys/ sells
• Past performance analysis
• Look at bios for previous companies

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Financials

• 10-K
• Annual Report
• 10-Q
• Quarterly Report
• 8-K
• Material Definitive Agreements not made in
  ordinary course of business
• Changes in management, directors, accountants,
  asset sales/purchases, bankruptcies, etc.

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Financials Continued

• DEF 14a
• Proxy statement
• Form 4
• Change in beneficial ownership

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Breaking Down Financial Statements

• On Companys and SECs website
• http//www.sec.gov/edgar/searchedgar/companysearch
  .html

• On Companys and SECs website
• http//www.sec.gov/edgar/searchedgar/companysearch
  .html
• Ratio analysis
• Discounted Cash Flow analysis

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Invest In What You Know

• Coined by Peter Lynch
• Allows individuals to find value companies before
  fund managers
• Look for companies you normally encounter in your
  day-to-day lives
• Good starting point for investing
• Books
• One Up on WallStreet
• Beating the Street

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Efficient Markets?

• In completely efficient markets, no analysis
  would make a difference
• A Random Walk Down Wallstreet
• Long-term-efficient
• Short-term-????

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• Most of the time common stocks are subject to
  irrational and excessive price fluctuations in
  both directions as the consequence of the
  ingrained tendency of most people to speculate or
  gambleto give way to hope, fear and greed."
  Benjamin Graham

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Strengths

• Good for spotting long-term trends
• Economic, demographic, technological, or consumer
  habits
• Spotting value
• Uncover valuable assets, strong balance sheets,
  stable earnings, earning power
• It helps you better understand the business and
  how it makes money

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Weaknesses

• Very time consuming
• Some models are very subjective
• As much as an art as a science
• Intrinsic value is in the eye of the beholder

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Value Investing
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How to find value

• Find intrinsic value, determine if company is
  trading below it
• Fundamental analysis
• Study famous value investors strategies
• www.gurufocus.com

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Things to look for

• High dividend yields (not too high)
• Low
• Price to book ratio
• Price to earnings (PE) ratio
• Price to cash flows

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The Intelligent Investor

• Read it!

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Resources

• Company websites
• News sources
• WSJ, Reuters, Bloomberg, SEC, etc.
• The area around you
• Visiting malls, talking to family and friends

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Recent Action
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• Fueled by
• Better than expected earnings
• Mainly due to cost cutting
• Economic data fueled by government spending
• Realization that it is not the end of the world

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Future?
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Future Problems?

• Commercial Real estate
• DEBT! DEBT! DEBT!
• Lack of revenue growth in companies
• Those earnings are not the achievement of
  risk-takers. These are gifts, hidden gifts, from
  the government. George Soros

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Websites

• www.investopedia.com
• www.seekingalpha.com
• www.fool.com
• www.gurufocus.com
• finance.yahoo.com
• www.stockcharts.com

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Other Cool websites

• www.updown.com
• www.equitrader.com
• www.freetradingvideos.com