Value Analysis:- How to Determine Fundamentally Weak & Strong Stocks
Wow Paul-that's an excellent idea; (although for obvious reasons, I'm not sure if it will be acceptable to Iraj...I only wish it is
)Raj
Grey1
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No problems at all ,, I once tried to CAM record one of my trading days which I could not up load it as a file on T2W and I gave up,,,
Grey1
LuckyBucks
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Ultramarine
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That would be very much appreciated Paul. Thank you very much for that offer. Please put me on your list. And many thanks also for what you have already produced for us.
Al
LuckyBucks
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Paul,
I would be definately be interested. Although I'll attend, the DVD will very useful for review.
Regards,
Chris
I would be definately be interested. Although I'll attend, the DVD will very useful for review.
Regards,
Chris
Looks like there haven't been any contributions so far, but here is a little something that is, IMHO, worth pondering. In the current market spike, stocks with a high institutional holding (as reported by Yahoo finance) have performed very significantly better than those with a low institutional holding.
This appears to be general, extending across many industries.
I have chosen a universe of stocks priced above $5.00 and average daily dollar volume of $1.2M and screened on Jan 18. The first chart shows an equi-weighted index of the 200 stocks with the highest institutional holding from this universe. Percent gain is ~10%.
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Grey1
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The topic of valuation is rather subjective and value is in the eyes of the beholder.
Even if we all agree on what measures we use, there is the question of if we are measuring current valuation, or projected (future) valuation.
The standard measures of valuation include:
- Book value (also called NAV)
- Price to cash ratio
- Gearing
- Net cash
- and the old P/E ratio
Most fundamentalists use more than just one measure.
Future valuation is an even more subjective topic because that's your guess of what the copmpany will be worth given what you know about their pipeline.
Even if we all agree on what measures we use, there is the question of if we are measuring current valuation, or projected (future) valuation.
The standard measures of valuation include:
- Book value (also called NAV)
- Price to cash ratio
- Gearing
- Net cash
- and the old P/E ratio
Most fundamentalists use more than just one measure.
Future valuation is an even more subjective topic because that's your guess of what the copmpany will be worth given what you know about their pipeline.
Glenn
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Hi Paul
This reminds me of when I first started investing/trading in Growth companies years ago using 'The Armchair Investor' by Bernice Cohen. Her approach (Faster Gains) was based upon the more traditional methods of fundamental analysis i.e. P/E growth, PEG factor etc. from Company Refs, plus simple TA. It evolved from the methods of Jim Slater (The Zulu Principle) and CANSLIM.
Her book got me started in serious trading rather than investing in mutual funds.
Looking into the use of CAPM as an alternative approach, I came across this article on the Motley Fool website.
Fool.com: What If Apple Never Grew? (Community) December 4, 2000
It contains an approach using CAPM to determine (in 2000) what AAPL shares were worth if the company never grew and just relied on it's cash flow from existing assets to stay in business.
The outcome is a target price against which to compare the current price.
As the article contains the use of CAPM in the process of valuation I thought it would be of interest to TT members in understanding where it fits and how it might be used.
As such I think it might provide one way to make a start along the road of fundamental analysis using CAPM.
Whilst it may turn out to be a dead-end I think it is worth a read.
My initial plan is to take some members of the weak list and plug their fundamental details into the calcs to see what comes out in the form of target prices. This will be time-consuming because reading accounts is not always straightforward bearing in mind accoutants tricks in hiding information and varying methods of reporting fundamental data. I'll start by using data from Yahoo Finance company profiles. I have already created a spreadsheet which does all the calcs; the difficulty will be in finding the correct numbers to plug in !
I hope that any fundamental experts out there (DCraig ?) will quickly draw attention to any concerns they have about this approach so that time is not wasted down blind alleys.
And if Grey1 reads this, any comments, bad or good, would be most welcome.
However I respect the fact that he thinks people should learn to walk before they run, and I agree with him on this. Nonetheless TT members can do their own background research if they have the time and inclination, and this might make it easier for Grey1 when he is inclined and feels the time is right to touch on the subject, because by that time some TT members might be better informed.
Glenn
Glenn
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Just to add that I'll post the spreadsheet up if this route looks worthwhile.
I just plugged in the numbers for ARM (ArvinMeritor Inc.) and got a target of -( minus) $55. Current price is $14.07.
Ok that's not very realistic or helpful as a target, except to draw attention to the fact that something isn't right about this company (or this method, or my spreadsheet !).
At least it concurs with Grey1's view of it being fundamentally bankrupt, in which case the target is zero or whatever the liquidators can recover per share, unless the company or Fed etc. do something magical to recover its fortunes.
Glenn
I just plugged in the numbers for ARM (ArvinMeritor Inc.) and got a target of -( minus) $55. Current price is $14.07.
Ok that's not very realistic or helpful as a target, except to draw attention to the fact that something isn't right about this company (or this method, or my spreadsheet !).
At least it concurs with Grey1's view of it being fundamentally bankrupt, in which case the target is zero or whatever the liquidators can recover per share, unless the company or Fed etc. do something magical to recover its fortunes.
Glenn
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Glenn
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Here is another website which looks interesting, in particular because it mentions the Dividend.
mofinet.com: Introduction / Manual for valuation of companies in the stock market
See sections 2 (CAPM) and 3 (Share Value).
Calculation of share value for ARM results in 4 cents using Div1 and 16 cents using Div0.
Currently $14.07
Glenn
mofinet.com: Introduction / Manual for valuation of companies in the stock market
See sections 2 (CAPM) and 3 (Share Value).
Calculation of share value for ARM results in 4 cents using Div1 and 16 cents using Div0.
Currently $14.07
Glenn
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leovirgo
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Paul
It is a good idea. Do we get to see the screen shots only or with Grey1 talking to the camera? As for the copying and distribution, please choose the way that suits you. Many thanks,..
Hi Glen,
when you get a chance, could you post the figures you used for your ARM calculations.
I'm getting together a spreadsheet to calculate fundamentals, I've put in the figures from yahoo finance and I'm getting a target of -$51.50 per share.
It would be useful if i could check the figures i used against your figures
thansk
glen
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