Equity Analysis
Get flash to fully experience Pearltrees
applied...
For me, one of the largest red flags in the market has been the continued poor health of financials. The reason, of course, is that they are struggling to shrink their balance sheets, “extend and pretend” on their loan books, and earn their way out of impending Japanization. I’m not sure where I got this little piece of wisdom (and if you can prove it wrong please let me know): "There has never been a bull market in history that hasn’t been led by financial stocks." A sobering thought. Banks are, despite all their crimes, still the veins and arteries that pump credit around the body of the economy which acts as a lifeblood to economic activity. It seems easy to say as someone who entered the industry in 2008, but I can’t understand why people want to bother with financials.
Banks – Lehman Brothers 2.0 and Earnings Hocus Pocus
Balance sheets are a crucial source of information for stock investors. Balance sheets help in determining the financial health of a company and their analysis should be a large component of one’s stock screening and selection methodology, even for the novice investor. The balance sheet, which is the cornerstone of a company’s financial statement, reveals information about the company’s assets, liabilities and its net worth or equity. These three segments tell the investor what the company owes and owns as well as the amount that the shareholders have invested at any given point of time.
Why a Basic Understanding of Balance Sheets Is Indispensible to Value Investors
Valuation
The goal of every value investor is to find undervalued, strong businesses that are likely to grow in value in the long run. Warren Buffett and Charlie Munger’s four filters guide us to purchase “cheap stocks” of good companies that we understand, which have durable competitive advantages and solid managements. While strong analytical, mathematical and financial skills are crucial for investors to develop, critical thinking is just as important and is a skill best developed by studying the liberal arts. I’ll leave the topics of temperament and patience to another day. The goal of this article is to offer a few tips on how to think critically about the strategic position of companies that you are looking to buy. In his book, "Common Stocks and Uncommon Profits," Philip Fisher highlights 15 questions that can assist us in critically analyzing companies' longer term prospects and provides us with a situational analysis of environment:
Situational and SWOT Analysis for Value Investors
Should You Think About Stocks in Terms of Probabilities or Defenses? -- GuruFocus.com
If you have what are your thoughts on Chapter 6, The Mathematics of Investing? In this chapter the author describes using probability theory based on Fermat/Pascal system along with the Bayesian Approach to determine if an investment has odds in your favor. In a nutshell it uses decision trees to help with the analysis.10 Essential Questions to Ask When Deciding What Multiple to Pay For a Stock -- GuruFocus.com
Buffett has correctly pointed out that the correct way to value a business is to calculate the discounted value of all its future cash flows. The concept is simple. The application is not. For many businesses, it is difficult to calculate this with a level of precision that has much utility. Some businesses are sufficiently predictable that a careful business analyst can make a reasonable and useful calculation of its DCF, or what Buffett calls its intrinsic value.
Buffett-Munger Highlight Weekly Report – FactSet Research -- GuruFocus.com
FactSet Research Systems Inc. (FactSet) ( FDS ) is a provider of global financial and economic information, including fundamental financial data on tens of thousands of companies worldwide. FactSet supports the investment process from initial research to published results for buy and sell-side professionals. These professionals include portfolio managers, research and performance analysts, risk managers, marketing professionals, sell-side equity research professionals, investment bankers and fixed income professionals. The company’s applications provide users access to company analysis, multi-company comparisons, industry analysis, company screening, portfolio analysis, predictive risk measurements, alpha testing, portfolio optimization and simulation, real-time news and quotes and tools to value and analyze fixed income securities and portfolios.
Metrics
In the video above, Hewitt Packard’s CEO Leo Apotheker said the following: Carl : Before we let you go, Leo, I don’t know if there’s been a quarter since you joined where the company beat, if you will, I wonder you’ve got to be looking forward to that day. Leo Apotheker : We’ve beat this quarter.
Understandings Earnings Estimates | The Big Picture
If there is one overriding theme this year for investors, it is uncertainty. Unsure about the staying power of the recovery in the US and debt woes both here and in Europe, investors have flocked to emerging markets and have been well rewarded. The iShares emerging markets index ETF is up 12% on the year, nearly double the return in the S&P500. For investors who took a more selective approach, the returns were even better. The iShares South Africa and Korea ETFs are up 25% and 15% respectively year-to-date. With an uneven recovery that has been neither global nor broad, 2010 has been a year where being selective and being right has really paid off – this market is a stock picker's delight.
Stock Picker's Delight - AlphaClone
Analyzing Financial Statements
This topic could be and is a full semester course at some business schools. It is a deep and rich topic that I can’t cover in one single blog post. But it is also a relatively narrow skill set at its most developed levels.
Graham & Dodd's Security Analysis has long been held as one of the seminal investment works since it was first published in 1934. Revised several times, the first two editions were perceived as the most insightful versions.
Security Analysis: Sixth Edition, Foreword by Warren Buffett
Financial Statement Analysis: A Practitioner's Guide
Review “Any book that reaches its 4th edition (updated to 2011) should be good. That′s true in spades for Financial Statement Analysis.Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports
This review is from: Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports, Third Edition: How to Detect Accounting Gimmicks and Fraud in Financial Reports (Hardcover) As a financial accountant, I have special appreciation for "Financial Shenanigans" by Schilit and Perler. Like the preface mentions, this book truly provides the "post-mortem analysis" it promises.Given the promise of the book's title, I was disappointed.