Meeting 10/19/14

Download Report

Transcript Meeting 10/19/14

DISCUSSED DURING HAWKTRADE MEETINGS. Past performance does not guarantee future results. Investment returns and principal value will fluctuate, so that
investors' shares, when sold, may be worth more or less than their original cost. Investing in any financial instruments does not guarantee that an investor will make
money, avoid losing capital, or indicate that the investment is risk-free. There are no absolute guarantees in investing. HAWKTRADE and its members do not bear any
responsibility for losses or gains made by members trading on their personal accounts based on analysis from HAWKTRADE meetings.
Administrative Info
Fundamental Analysis 101
Banking Industry
Current Market Events
Platform: Wall Street Survivor
League: HawkTrade Competition
$15 fee to join
Ability to win great prizes!!!
League Settings:
Start Date: 9/15/2014
End Date: 12/ 05/2014
Portfolio Size: $100,000
Maximum Trade Position: 25%
Able to trade derivatives and options
If you have any questions, comments, or
concerns, contact me: [email protected]
Mason O’Neill – Infinera Corporation
 INFN – 10.52%
Managing Partner at True North Wealth
His primary focus is on educating high net
worth families and organizational clients on
complex financial matters and simplifying
their lives by designing comprehensive
Juniors and high-achieving sophomores are
encouraged to apply.
Email will be sent out tomorrow for those
who provided me with their email.
Twitter - @HawktradeUI
Fundamental Analysis 101
A method of evaluating a security that entails
attempting to measure its intrinsic value by
examining related economic, financial and other
qualitative and quantitative factors.
Fundamental analysts attempt to study
everything that can affect the security's value,
including macroeconomic factors (like the
overall economy and industry conditions) and
company-specific factors (like financial condition
and management).
A methodology of observing influential
factors and drivers from a broader spectrum
and narrowing in to company specific drivers.
Economic Factors: GDP growth, Consumer
Confidence, Employment
Industry Factors: Current Trends,
Competition, Regulation
Company Factors: Operating Margins,
Revenue Mix, Free Cash Flow
Real GDP is the market value of all goods and
services produced in a nation during a specific
period of time.
Indicator of economic health and stability,
often times influencing Federal Reserve’s
monetary policy.
CPI measures the changes in the prices of
goods and services by urban consumers in a
specific time period (monthly).
It is the best gauge of inflation in the
economy and often drivers monetary policy.
It is important to understand what CPI is
doing to identify whether COGS is moving
from supply/demand imbalance, and what
true returns are.
Provides current unemployment rate, as well
as jobs added for the previous month.
Survey of roughly 300,000 establishments
across 600 industries, account for approx. 1/3
of all payroll employees.
It is important because it gives insight into
current wages earned and labor costs, while
also providing overall view of the strength of
the labor force and economy.
Money Supply (M2)
Consumer Confidence Survey
Producer Price Index (PPI)
Housing Starts
Bloomberg Economic Calendar
U.S. Department of Labor –
U.S. Department of Commerce –
Life cycle – important to understand the
whether or not it is a mature industry: proven
demand, barriers to entry, excess to capital
Business cycle – link to the overall economic
cycle, seasonality of business, revenue mix
according to interest rates
Technology – does the industry introduce
new technology, is it in danger of being
obsolete from new tech
Government – effect of government
regulation on supply chain, consumption,
safety/employee benefits
Social Changes – convenience of platform,
lifestyle changes, health concerns
Natural resources used in production of
Supply/Demand relationship.
Interest rates on financing activities.
Union costs and wage increases.
P/E Ratio
Dividend Yield
P/B Ratio
Debt Levels
Operating Margins
Revenue Mix
Market Share
IBIS World –
S&P NetAdvantage –
Yahoo Finance
Product Lines – current demand for products,
revenue mix
New Products – potential growth of new
Customer Base – the customers that are likely
to buy their products (income distribution,
geographic, lifestyle, gender)
Marketing Strategy
Competitive Environment – how many
players, market share, diversification, barriers
to entry, life cycle
Comparative Analysis – operating margins,
revenue mix, debt levels, shareholder policy,
pricing ratios
Free Cash Flow Generation
Dividend Yield
Revenue Mix
Debt Levels
Operating Expenses
Every publicly traded company must report
financial statements to the SEC.
 10K – annual report of financial operations of the
 10Q – quarterly report of financial operations of
the company
 SEC –
 Thompson One
Moderate growth in recent history, but expected
to improve
 Consumers are still mending their eroded trust post
financial crisis
 In the period between 2009-2013 European and AsiaPac banks outpaced domestic growth
Very competitive, many institutions offer the
same core services
 Banks, thrifts, credit unions, investment banking
firms, brokerage fees etc.
 Some product differentiation in terms of specialized
services and fees
Interest Rates
 The banking industry is extremely sensitive to interest rate
 The majority of a banks revenue comes from assets (loans) on
their balance sheet
 The difference between a banks assets and liabilities
 A positive gap generates profits during periods of high interest
Capital Adequacy
 Banks are required to have certain types of capital in reserve in
the case of an adverse scenario
 Banks can either issue new equity or shrink balance sheets to
increase capital
Net Interest Margin (NIM): average interest
margin received on borrowed funds
𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 − 𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
𝑇𝑜𝑡𝑎𝑙 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝐴𝑠𝑠𝑒𝑡𝑠
Rates Paid on Funds (RPF): average interest
rate that the bank pays on funds
𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
𝑇𝑜𝑡𝑎𝑙 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝐴𝑠𝑠𝑒𝑡𝑠
Litigation Expense
Banks are still paying off
the settlements that
came after the crisis
Bank of America (BAC)
reported $5.6 billion in
litigation cost
JP Morgan Chase & Co
(JPM) had an
unexpected $1 billion
legal expense
Earnings Season
The “big banks” reported
earnings last week
 Bank of America
 Citigroup
 JP Morgan Chase
 Wells Fargo
 Goldman Sachs
 Morgan Stanley
Results were positive
Financial holding
company involved in a
myriad of services
Reported net income of
$5.57 billion
Increased fixed income
revenues due a volatile
Mortgage business profit
tumbled, down $266
million from prior year
Three operating
 Community banking
 Wholesale Banking and
 Brokerage and Retirement
Earnings of $5.7 billion
meet expectations
Returned $3.6 billion to
shareholders through
stock buybacks and
repurchase agreements
Strong revenue
Producer Price Index, Retail Sales and Housing Starts
Measures inflation
from the perspective
of the seller
 Has been very low,
even turning negative
 Decreased by .1%
when analysts
expected an increase
Declined .3% in
 Number was drug
down by low auto and
gasoline sales
 Core still decreased by
.1% after removing the
gasoline and auto
A “housing start” is
registered at the start
of construction of a
new primarily
residential building
 Multi family
component up 16.7%
 Single family
component up 1.1%