Analysis (Fundamental) - According to the Wizard
Investment Analysis (Fundamental): A quick review of financial reports
If you have a lot of time on your hands, you can review detailed corporate reports filed quarter-yearly with the securities commission and available to anybody who cares to investigate. The figures you'll read in the financials have at best an indirect relationship with the corporation's stock price. For help from independent and trustworthy sources, I'd go to Standard & Poor's or Value Line. You could also turn to a Wall St. analyst but is he independent or competent? Probably not. That's why I ignore the "opinions" and just look at how they lay out the corporate facts...
Investment Analysis (Fundamental): The income statement
The best source of corporate information in the annual report is the Statement of Income. That's because it reflects a period of a quarter year or a full year of operations whereas a balance sheet is a snapshot of a moving picture. In less than 30 minutes of studying, investors can adequately review (1) Revenues from sales of products, (2) Operating income after paying production, sales and admin expenses, and (3) Net income, which is the well-known "bottom line " expressed on a per-share basis. The figures must all be seen in the context of the current stock price...
Investment Analysis (Fundamental): The balance sheet
The part of a financial report that shows the financial strength of the corporation is a snapshot, not a moving picture. Sometimes the notes to the Balance Sheet are as informative as the figures themselves or the trends you can spot between snapshots. You can get into the fine detail but the key points are restricted to: (1) Current assets versus liabilities, (2) Accounts receivable, (3) Inventories, (4) Gross property, (5) Depreciation, (6) Long-term debt, (7) Stockholders' equity or book value and (8) Dividends. Watch the ratios and trends more than the dollars...
Investment Analysis (Technical): About the time factor
Technical analysis is based largely on one factor: market prices. As prices change literally by the second, for various reasons, you must have an understanding of the time factor. You do that by Time Series Analysis. As an investor or trader, there is always a time when you have to make a decision and a time when you ought to let things ride. Market prices are either rising or falling; the outlook is either good or it is bad. The longer you study markets, the more you will be conscious of its rhythms. The more you will see that the capital market is a natural phenomenon...
Investment Analysis (Technical): Mastering the basics
Technical buy and sell signals using Time Series Analysis of market price and volume data is an application of mathematics but it is certainly not science. These signals are called indicators for a good reason - they are not precise. All of them work some of the time; none of them work all of the time. Having said that, I do rely on them as much as fundamentals like discounted cash flows, price-earnings ratios and earnings growth rates. Technical analysis is just one of three approaches to making investment decisions (technical, fundamental and quantitative)...
Investment Analysis (Quantitative): Screening the market
Rather than studying markets from the top-down, which is technical, or from the bottom-up, which is fundamental, the quantitative approach is to study key technical and fundamental data across the market spectrum. I'm still looking for somebody to properly explain quantitative analysis to me. I have the general concept in hand but I still have some doubts. Forbes magazine defines it as "the use of advanced econometric and mathematical valuation models to identify the firms with the best possible prospectives". Can anybody make sense out of that gobbledygook?
Investment Analysis (Economic): Trying to understand the Fed
Past is prolog in the markets. To build and sustain entertainment interest, and keep you guessing, Wall St. and the media frequently change focus from one economic data series to another. In the 1999 stock cycle, the public's fixation happened to be on 30-year U.S. Treasury Bond rates, the Fed rate, and CPI numbers; whereas in past years investors were focused squarely on M1 and M3 money supply numbers, factory utilization (industrial capacity), and government debt levels, among other such data. By 2003, the media focus is on Consumer Confidence and Housing Starts...
Investment Analysis (Economic): Seven economic analysis protocols
I need to frame my investment analysis and opinions in my sense of the economy. Overall, there are seven economic analysis protocols I follow: Each one gives a unique perspective of an important element of the global and regional economy. As investors routinely analyze this type of information, actively putting the data relationships together, a clearer picture of the economy emerges, which can be applied to better investment decisions. Remember, stock prices are better understood by well-informed traders and investors than by economists or media people...
