Transcript Stock Analysis: Technical and Fundamental Analysis By Jiroj Buranasiri, CFA

Stock Analysis: Technical
and Fundamental Analysis
By
Jiroj Buranasiri, CFA
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I. Technical analysis
II. Fundamental analysis
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I. Technical analysis: outline
A. What is it about?
B. Analysis
C. Sources of information
E. For further study
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A. What is it about?
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Technical analysis focuses on demand &
supply by studying the movement of price
and volume.
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Its objective is to find market trend and how
long the trend will continue to make
investment decision – Buy, Hold, or Sell.
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A. What is it about?
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Trends:
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up-trend,
down-trend,
or sideway (sideway-up, sideway-down)
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B. Analysis
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Graphs:
Bar
Line
Candle
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B. Analysis
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Graphs: bar, line, candle
Techniques:
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Moving Average (MA)
Exponential Moving Average (EMA)
Moving Average Convergence/Divergence
(MACD)
Money Flow Index (MFI)
Rate of Change (ROC)
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B. Analysis
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Techniques:
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Relative Strength Index (RSI)
Stochastic
Volume
Volume +MA
William % R
Parabolic
Bollinger bands
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B. Analysis
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Techniques
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Fibonacci
Dow theory
Elliot wave
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Remarks
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Price moves in trend.
History repeats itself.
Volume normally goes with trend.
Volume typically leads price during bull
move.
Rising price with falling volume is abnormal.
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C. Sources of information
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Efinancethai,
Reuters,
Bloomberg,
Etc.
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C. For further study
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Book
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Technical Analysis: The Complete Resource for
Financial Market Technicians by Charles D.
Kirkpatrick and Julie R. Dahlquist, FT Press,
The Investor's Guide to Technical Analysis by
Curt Renz and Curt Renz, McGraw-Hill,
Etc.
Website: http://finance.yahoo.com,
http://stockcharts.com
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II. Fundamental analysis: outline
A. What is it about?
B. Analysis
C. Sources of information
D. For further study
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A. What is it about?
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Finding fair value of stocks.
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Objective is to check if market price is
cheap, fair, expensive for investment – Buy,
Hold, or Sell or to explain the change of
market price.
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B. Analysis: stock valuation process
1. Understand firm and stock’s nature
2. Forecast
3. Choose valuation method
4. Make decision
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1.Understand firm and its stock’s
nature
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From company itself
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Financial statements,
IR
From other sources
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Research paper,
Firm’s competitors
Etc.
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2. Forecast
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Make assumptions
Information, information, information
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Information’s issues
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What information is relevant? News
concerning risk and return
When will it come out?
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Getting start (use consolidated)
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Restate statements and work from restated
statements.
Analyze relevant data and forecast:
revenue break-down, cost break-down
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Analysis:
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Top down
Bottom up
Top down and bottom up
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Top down / Bottom up
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Top down:
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Bottom up
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Economy -> industry -> firm -> stock
Globalization – impact.
Firm -> industry -> economy
Top down and bottom up:
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Economy <-> industry <-> firm <-> stock
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Economy
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Economic variables: GDP growth rate,
unemployment rate, etc.
Economic life cycle: changing
Domestic & international: globalization
impact
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Industry
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Porter’s 5 forces
Boston matrix: star, dog, cash cow,
question mark
Change in external factors: social,
regulations, consumer’s taste, etc.
Industry life cycle: sun-rise, sun-set
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Company
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Management quality
Accounting – clean, dirty
Business nature - income, cost, margin’s
volatility, key success factors, position,
strength, weakness etc.
Financing
Growth opportunity
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Company
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Dream & do
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Remarks
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If the success (failure) is consistent or
temporary.
Past success doesn’t guarantee future
success.
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Understand the stock’s nature
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Major investors
Sensitive to foreign fund flows
Defensive or cyclical
Etc.
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3. Choose valuation methods
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Choosing criteria:
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Characteristics of firm
Data: availability, quality
Valuation methods
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Discount cash flows
Price multiples
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Discount cash flows
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Discount rate
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Cash flows
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CAPM, APT
Dividends, Free cash flow for firm (FCFF), Free
cash flow for equity (FCFE), Residual income
(RI)
Growth rate
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= ROE x b
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Price multiples
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Price Multiples
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Link to competitors, industry, past
Link to company’s fundamentals – discount cash
flows
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Price multiples: PE multiple
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Trialing PE (Current PE)
Po/E1 = (D1/E1)/(r-g) = (1-b)/(r-g)
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Leading PE (Forward PE or Prospect PE)
Po/Eo = {[Do(1+g)]/Eo)}/(r-g) = [(1-b)(1+g)]/(r-g)
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Price multiples: PBV multiple
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Book Value is unlikely to be negative.
Compared to earnings, book Value is less
manipulated.
PBV = (ROE-g)/(r-g)
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Price multiples: P adj BV multiple
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Adjusted BV = BV – (NPV – Acc. Provision)
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Price multiples: PS multiple
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No negative sales
Sales is less likely to be manipulated.
Po/So =(Eo/So)(1-b)(1+g)/(r-g)
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But sales might not mean profit. (No
information on cost structure)
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Price multiples: PCF
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Cash flow
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EPS + non-cash charge
CFO
FCFE
EBITDA
Less manipulation
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4. Make decision
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Buy (undervalued, buy, trading buy, strong
buy)
Sell
Hold
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Some technical terms in fundamental
analysis
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ARPU
GRM
Baglog
BDI
NIM
L/D ratio
CAR
CASA
CAPEX
OPEX
P&L
B.E.1.1
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C. Sources of information
Anything affecting company’s earnings
(growth, volatility)
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Newspaper: local (Bangkok Post, The Nation,
Bangkokbiznews, etc.) and international (The
New York Times, Financial times, etc.)
Internet: www.settrade.com, www.set.or.th,
www.sec.or.th, www.bot.or.th,
www.nesdb.go.th, www.worldbank.org,
www.imf.org, http://www.efinancethai.net, etc.
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C. Sources of information
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Reuter, Bloomberg, Setsmarts, E-financethai
Analyst meeting, opportunity day
Company presentation
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For novice
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What data?
To under stand a company’s nature,
start with 56-1 form, company’s
presentation, investment analysis
paper, opportunity day meeting and
company’s annual report
Where to find?
When it will be release?
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Financial data (SEC, SET)
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Why SEC, SET?
To be fair to public, companies should not
provide financial data to a particular investor (or
group) before public.
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SEC_ financial statements
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SET_ latest news
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Opportunity day_ meet company’s
management team
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Company’s presentation
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From company’s website.
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Investment research paper
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Where to find research paper?
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Brokers
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Where to find research paper?
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Free?
•Free?
•Free?
•Free?
•Free?
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For further study
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Books:
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Security analysis, Benjamin Graham and David L. Dodd,
McGraw-Hill,
The intelligent investor, Benjamin Graham, HarperCollins
Publishers,
Analysis of equity investments: valuation, John D. Stowe,
Thomas R. Robison, Dennis W. McLeavey, Association for
Investment and Research, etc.
Research paper
Websites:
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www.tsi-thailand.org,
www.ft.com, etc.
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Q&A
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Thank you
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