Transcript Emory Trade
Emory Trade
October 17, 2005
Board of Directors
► President: Michael Becker ► Co-CEO: Simon Tan ► Co-CEO: David Burton ► CFO: Kevin Cheng
Executive Board
► ► VP of Public Relations: Ashley Terry Asst. VP of PR: Eric Joannu ► ► VP of Accounting: Ryan Huff Asst. VP of Acct.: Niles Lingard ► VP of Fantasy Stock Market Game: David Olscamp ► VP of Membership: Sam Shapiro ► VP – Event Coordinator: Stephen Pack ► VP – Market Analyst: Suhan Islam
(Note: Positions listed in no particular order)
Agenda
► Prize for Attendance! Sign up for next car wash (10/29)!
► Introduction & Future of Club (Michael) ► $100 Fantasy Game winner: Curt Champagne ► Fantasy Game (David) ► Stock Analysis (Suhan) ► Saturday’s Car Wash + Fox 5 (Niles) ► Next meeting: November 14
th
!!
Attendance + 2
nd
Car Wash
►
Sign the attendance sheet!
Prize for best attendance at end of semester!
►
2
nd
Car Wash – Oct 29
th Sign-up with your available times! ► (11:30 am – 3 pm)
Introduction, Future of Club
►
Presented by Michael Becker, President
Summer Fantasy Game Winner!
► Curt Champagne receives a $100 check!
► Congratulations!
► How can you win?
His strategies!
Next Fantasy Game: Marketocracy
►
David Olscamp: Fantasy Game VP
Stock Analysis
►
Suhan Islam: VP – Market Analyst
Hewlett-Packard (HPQ)
Stock Analysis
Random Terms
• Quarter – Most Recent Quarter (MRQ) • Fiscal Year – Twelve Month Period (FY) • Trailing Twelve Months (TTM) – Most recent twelve months; moving measurement.
Types of Analysis
• Fundamental • Qualitative Analysis • Technical
Background
technologies, solutions, and services to consumers, businesses, and governments worldwide. – It operates in seven segments: Personal Systems Group, Imaging and Printing Group, Enterprise Storage and Servers, HP Services, HP Financial Services, Software, and Corporate Investments. • They sell commercial personal computers, consumer PCs, workstations, handheld computing devices, digital entertainment systems, calculators and other related accessories, and software and services for commercial and consumer markets.
Why is HP Interesting
• Technological company with growth potential • Turn around situation with new CEO • Strong Revenue growth • Brand-name recognition • Large-cap safety
Fundamental Analysis
• Also known as quantitative analysis • Primarily involves looking at historical performance to predict future performance • Specifically looks at revenue, expenses, assets, liabilities, and all the other financial aspects of a company – Find this data in 10K (sec.gov): Balance Sheet, Income Statement, Cash Flow Statement
Current Ratio
– Current assets are short-term, less than one year – Current Assets include: Cash, Inventory, Short-term receivables – Current Liabilities include: Short-term payables • General idea : A company is generally considered financially healthy when current assets are equal or higher than current liabilities • Current Ratio of 2 is superb, but 1.35 is good; the higher the better • HP Current Ratio – 1.429 per most recent quarter
Debt to Equity Ratio
– –
Long-Term Debt Equity: Total assets – Total Liabilities
• General idea : A higher debt/equity ratio generally means that a company has been aggressive in financing its growth with debt • New or growth companies tend to have higher debt since they are growing. However, too much debt is never good • HP: Long-term debt/ Equity = Debt/Equity Ratio –
5.77 B / 37.47 B = 0.154 (mrq)
• Lower the ratio the better, but it’s a comparative tool within an industry • Recommendation: 0.1 (less than .0338 is great)
Price to Earnings Ratio
• What is it?
– The price of the stock / company’s yearly earnings per share • Or Market Capitalization/Net Income (use diluted # of shares) – Earnings: Earning in EPS (Earnings per share) • General Idea : The higher the P/E ratio, the higher the speculation of the company’s future earning performance • High P/E means market is optimistic overbought, lots of potential growth • HP: Price / Earnings = Ratio – 27.54 / 1.05 = 26.33 (Trailing Twelve Months) • Generally PE of 15 is good, but it’s a intra-industry comparative tool. Tech and growth companies have higher PE –
Which has the highest and lowest PE? Why?
GE, Dell, HP, Google, Starbucks or Exxon Google: 89; Starbucks: 46; HP: 26; Dell: 24; GE: 20; Exxon: 13
Growth
• Definition: The compounded annualized rate of growth of a profit, earnings, revenues, etc.
– Relative measurement (percentage): • (This year’s profit – Last year’s profit) / (Last year’s profit) • General Idea : Higher the growth rate, higher the risk.
– Want to look for growth for higher potential return • Your ability to take on risk determines how many growth stocks you want to have • Calculated by: (Year 2 – Year 1 / Year 1) – Usually read from sources • HP: Quarterly Revenue Growth: 9.90% (yoy) – Finance.yahoo.com
• • • • •
Earnings
Earnings
: The net income of a company during a specific period. Generally, but not necessarily, referring to after-tax income.
– Earnings are perhaps the single most studied number in a company's financial statements. They show how profitable a company is.
Guidance
has a role in the market because it provides information that can be used by investors to analyze the company, evaluate management, and create forecasts. Careful because numbers are internally generated and maybe somewhat biased
Earnings Estimate
– Analysts use : An analyst's estimate for a company's future quarterly or annual earnings.
forecasting
models, management guidance, and fundamental information on the company in order to derive an estimate.
Earnings Growth Rate
: indicators that reflect the opinions of industry analysts as to the growth potential of a company's earnings. HPQ Earnings Estimates
Insider Trading
• • • Is it legal?
The buying or selling of a security by someone who has access to material, nonpublic information about the security.
Insider trading can be illegal or the trade: –
legal
depending on when the insider makes
Illegal
when the material information is still nonpublic. Trading while having special knowledge is unfair to other investors who don't have access to such knowledge.
• Includes:
tipping
others when you have any sort of
nonpublic information
. Directors are not the only ones who have the potential to be convicted of insider trading. People such as brokers and even family members can be guilty.
–
Legal
once the material information has been made public, at which time the insider has no direct advantage over other investors. • The SEC, however, still requires all insiders to report all their transactions.
An executive, director or major shareholder
sold
recently
. (Neutral) a
small
number of shares Planned versus Unplanned*** HPQ Insider Transactions
Major Holders
• • Usually the largest shareholders of a company are not individuals but rather institutions • Analysis of Major Holders provides insight to what the some of the best managers think the stock is worth and in what capacity: growth, value, blue chip HPQ Major Holders
Qualitative Analysis
• How does the company compare to competitors • Is the company’s business model working • How are the officers of the company • Is there any extraordinary problems with the company – SEC investigation
Competitors
• competitors: PE, Net Income, EPS
• HP (27.35) is more pricey than its competitor Dell (32.93) and is not as efficient as Dell when it comes to making custom computers. – Unlike Dell, HP still relies on vendors to sell their product. However price comparisons of the two firms direct purchase programs do not show great disparity
HPQ and its Competitors
Business Model
• Very specific to the Company • HP: – HP’s retail computers are organized into two units: HP and Compaq – Compaq is made primarily for licensing to corporations or multiple unit buyers, its technology focuses on efficiency – HP unit is primarily made for private consumers and its technology focuses on high quality media both audio and visual • HP does significant Research and Development that it showcases – Nanotechnology
Moving Averages
• •
An average of data over a certain time period (ex: 50 day, 200 day) Note: Above 200 day moving average and it’s bouncing off the 50 day moving average
–
Conclusion: Its support is the 50 day moving average
Relative Strength Index
• Technical indicator that compares the days that a stock finishes up against when it finishes lower –
Overbought (>70) vs. Oversold (<30)
Stochastic Oscillator
• • Compares a security's closing price to its price range over a given time period. – Technical momentum indicator – The oscillator's sensitivity to market movements can be reduced by adjusting the time period or by taking a moving average of the result The theory behind this indicator is that in an upward trending market prices tend to close near their high, and during a downward trending market, prices tend to close near their low
Bollinger Band
• A band plotted two standard deviations away from a simple moving average • Because standard deviation is a measure of volatility, Bollinger Bands adjust themselves to the market conditions. When the markets become more volatile the bands widen (move further away from the average), and, during less volatile periods, the bands contract (move closer to the average) • This is among one of the most popular technical analysis techniques. The closer the prices move to the upper band, the more overbought the market, and the closer the prices move to the lower band, the more oversold the market.
Bollinger Band (cont.)
Moving Average Convergence
•
A trend
- following momentum indicator that shows the relationship • averages of prices.
rises above the signal line, the
•The
MACD
is calculated by subtracting the 26 average (EMA) from the 12-
2. Divergence - When security price
day EMA. MACD, called the "signal line", is then plotted on •
moving average.
$195 Raised @ Saturday’s Car Wash!
Thanks for coming!
►
Questions?
►
Dates to Remember:
Next meeting: November
14
th
!