Value Analysis:- How to Determine Fundamentally Weak & Strong Stocks

[brutusdog]

Thank you for the offer Iraj that's very generous and I'm sure it will be very imformative.

Sounds like a great idea Paul thanks for your efforts in making the audio from the last available.

Aj.

 

[rajibde]

Hi All,

I have a question that I will appreciate feedback on. When Iraj does the live trading seminar then it will be around 5 to 6 hours long. I have the equipment to record the whole session but it is not going to be practical to have this as downloadable as it will be getting on for 1GB in size. So I want to know if TT members would be interested in me doing this ? If so then I suggest I produce a dvd of the day that I could send out to those who want it at a small cost (the dvd + postage). Anyway let me know your thoughts as I have professional quality recording equipment that I have now figured out how to use for a session like this.


Paul

Wow Paul-that's an excellent idea; (although for obvious reasons, I'm not sure if it will be acceptable to Iraj...I only wish it is )

Raj

 

[Grey1]

Yes you are right Andy it is subject to Iraj being happy with this and will be of most use for those in the session as a refresher of the day.


Paul

No problems at all ,, I once tried to CAM record one of my trading days which I could not up load it as a file on T2W and I gave up,,,

Grey1

 

[iq200]

Hi Paul, Thanks very much for offering to provide the dvd of Iraj's live trading day. Please put my name down - I would be interested.
Regards,
Imran

 

[evostik]

Dvd

Paul

Just to let you know that I would be very interested in the DVD too. It would be great if you could get that set up.

ThanksSteve

 

[LuckyBucks]

Paul

I first would like to arrange a LIVE day trading SEMINAR so I can Trade LIVE and explain the whole concept of ENTRY AND RISK and how and when to stop loss, I rather to do this live with all guys watching the trade so I know I have got to the bottom of this ,, The seminar will have to be all day 230 UK time to the end,

I will then arrange another seminar to discuss the VALUE trading and how to pick stocks using a combination of TA and FA and get a little bit into CAPM .


Grey1

Thanks Iraj,

Your generosity in sharing you knowledge is much appreciated.

Zak

 

[Ultramarine]

Hi All,

I have a question that I will appreciate feedback on. When Iraj does the live trading seminar then it will be around 5 to 6 hours long. I have the equipment to record the whole session but it is not going to be practical to have this as downloadable as it will be getting on for 1GB in size. So I want to know if TT members would be interested in me doing this ? If so then I suggest I produce a dvd of the day that I could send out to those who want it at a small cost (the dvd + postage). Anyway let me know your thoughts as I have professional quality recording equipment that I have now figured out how to use for a session like this.


Paul

That would be very much appreciated Paul. Thank you very much for that offer. Please put me on your list. And many thanks also for what you have already produced for us.

Al

 

[LuckyBucks]

Hi All,

I have a question that I will appreciate feedback on. When Iraj does the live trading seminar then it will be around 5 to 6 hours long. I have the equipment to record the whole session but it is not going to be practical to have this as downloadable as it will be getting on for 1GB in size. So I want to know if TT members would be interested in me doing this ? If so then I suggest I produce a dvd of the day that I could send out to those who want it at a small cost (the dvd + postage). Anyway let me know your thoughts as I have professional quality recording equipment that I have now figured out how to use for a session like this.


Paul

I'm definitely interested in a dvd of the seminar on the 27th.

thanks

Zak

 

[chris_ri]

Paul,

I would be definately be interested. Although I'll attend, the DVD will very useful for review.

Regards,

Chris

Hi All,

I have a question that I will appreciate feedback on. When Iraj does the live trading seminar then it will be around 5 to 6 hours long. I have the equipment to record the whole session but it is not going to be practical to have this as downloadable as it will be getting on for 1GB in size. So I want to know if TT members would be interested in me doing this ? If so then I suggest I produce a dvd of the day that I could send out to those who want it at a small cost (the dvd + postage). Anyway let me know your thoughts as I have professional quality recording equipment that I have now figured out how to use for a session like this.


Paul

 

[dcraig1]

I think that everyone who was present very much enjoyed the seminar on Thursday and one of the things that Iraj was talking about was getting into stock valuation. It appears clear to me that being able to select stocks that are fundamentally weak or strong is a capability that will be of great value to all of us on TT. As such I wanted to start a thread where we can discuss the process of how we can go about doing this.

In my view it is key to being able to remain an independent trader.


Paul

Looks like there haven't been any contributions so far, but here is a little something that is, IMHO, worth pondering. In the current market spike, stocks with a high institutional holding (as reported by Yahoo finance) have performed very significantly better than those with a low institutional holding.

This appears to be general, extending across many industries.

I have chosen a universe of stocks priced above $5.00 and average daily dollar volume of $1.2M and screened on Jan 18. The first chart shows an equi-weighted index of the 200 stocks with the highest institutional holding from this universe. Percent gain is ~10%.

 

[dcraig1]

And the 200 stocks with lowest instituional holding. Gain about 2.6%

 

[Grey1]

And the 200 stocks with lowest instituional holding. Gain about 2.6%

Craig nice work and well done ,, u are a credit to TT

thanks

 

[tss42]

The topic of valuation is rather subjective and value is in the eyes of the beholder.
Even if we all agree on what measures we use, there is the question of if we are measuring current valuation, or projected (future) valuation.
The standard measures of valuation include:
- Book value (also called NAV)
- Price to cash ratio
- Gearing
- Net cash
- and the old P/E ratio
Most fundamentalists use more than just one measure.
Future valuation is an even more subjective topic because that's your guess of what the copmpany will be worth given what you know about their pipeline.

 

[Glenn]

I think that everyone who was present very much enjoyed the seminar on Thursday and one of the things that Iraj was talking about was getting into stock valuation. It appears clear to me that being able to select stocks that are fundamentally weak or strong is a capability that will be of great value to all of us on TT. As such I wanted to start a thread where we can discuss the process of how we can go about doing this.

In my view it is key to being able to remain an independent trader.


Paul

Hi Paul
This reminds me of when I first started investing/trading in Growth companies years ago using 'The Armchair Investor' by Bernice Cohen. Her approach (Faster Gains) was based upon the more traditional methods of fundamental analysis i.e. P/E growth, PEG factor etc. from Company Refs, plus simple TA. It evolved from the methods of Jim Slater (The Zulu Principle) and CANSLIM.
Her book got me started in serious trading rather than investing in mutual funds.

Looking into the use of CAPM as an alternative approach, I came across this article on the Motley Fool website.
Fool.com: What If Apple Never Grew? (Community) December 4, 2000
It contains an approach using CAPM to determine (in 2000) what AAPL shares were worth if the company never grew and just relied on it's cash flow from existing assets to stay in business.
The outcome is a target price against which to compare the current price.

As the article contains the use of CAPM in the process of valuation I thought it would be of interest to TT members in understanding where it fits and how it might be used.
As such I think it might provide one way to make a start along the road of fundamental analysis using CAPM.
Whilst it may turn out to be a dead-end I think it is worth a read.
My initial plan is to take some members of the weak list and plug their fundamental details into the calcs to see what comes out in the form of target prices. This will be time-consuming because reading accounts is not always straightforward bearing in mind accoutants tricks in hiding information and varying methods of reporting fundamental data. I'll start by using data from Yahoo Finance company profiles. I have already created a spreadsheet which does all the calcs; the difficulty will be in finding the correct numbers to plug in !

I hope that any fundamental experts out there (DCraig ?) will quickly draw attention to any concerns they have about this approach so that time is not wasted down blind alleys.
And if Grey1 reads this, any comments, bad or good, would be most welcome.
However I respect the fact that he thinks people should learn to walk before they run, and I agree with him on this. Nonetheless TT members can do their own background research if they have the time and inclination, and this might make it easier for Grey1 when he is inclined and feels the time is right to touch on the subject, because by that time some TT members might be better informed.

Glenn

 

[Glenn]

Just to add that I'll post the spreadsheet up if this route looks worthwhile.
I just plugged in the numbers for ARM (ArvinMeritor Inc.) and got a target of -( minus) $55. Current price is $14.07.
Ok that's not very realistic or helpful as a target, except to draw attention to the fact that something isn't right about this company (or this method, or my spreadsheet !).
At least it concurs with Grey1's view of it being fundamentally bankrupt, in which case the target is zero or whatever the liquidators can recover per share, unless the company or Fed etc. do something magical to recover its fortunes.

Glenn

 

[Trader333]

Glenn,

Thanks this is very useful. A few years ago I took an MBA and one of the modules was finance so I learned how to read the fundamentals. I am out of practice though so need to get back into it.


Paul

 

[Glenn]

Here is another website which looks interesting, in particular because it mentions the Dividend.
mofinet.com: Introduction / Manual for valuation of companies in the stock market
See sections 2 (CAPM) and 3 (Share Value).

Calculation of share value for ARM results in 4 cents using Div1 and 16 cents using Div0.
Currently $14.07

Glenn

 

[belflan]

Here is another website which looks interesting, in particular because it mentions the Dividend.
mofinet.com: Introduction / Manual for valuation of companies in the stock market
See sections 2 (CAPM) and 3 (Share Value).

Calculation of share value for ARM results in 4 cents using Div1 and 16 cents using Div0.
Currently $14.07

Glenn

thanks of posting these links Glenn, very interesting

Glen

 

[leovirgo]

Hi All,

I have a question that I will appreciate feedback on. When Iraj does the live trading seminar then it will be around 5 to 6 hours long. I have the equipment to record the whole session but it is not going to be practical to have this as downloadable as it will be getting on for 1GB in size. So I want to know if TT members would be interested in me doing this ? If so then I suggest I produce a dvd of the day that I could send out to those who want it at a small cost (the dvd + postage). Anyway let me know your thoughts as I have professional quality recording equipment that I have now figured out how to use for a session like this.


Paul

Paul

It is a good idea. Do we get to see the screen shots only or with Grey1 talking to the camera? As for the copying and distribution, please choose the way that suits you. Many thanks,..

 

[belflan]

Just to add that I'll post the spreadsheet up if this route looks worthwhile.
I just plugged in the numbers for ARM (ArvinMeritor Inc.) and got a target of -( minus) $55. Current price is $14.07.
Ok that's not very realistic or helpful as a target, except to draw attention to the fact that something isn't right about this company (or this method, or my spreadsheet !).
At least it concurs with Grey1's view of it being fundamentally bankrupt, in which case the target is zero or whatever the liquidators can recover per share, unless the company or Fed etc. do something magical to recover its fortunes.

Glenn

Hi Glen,

when you get a chance, could you post the figures you used for your ARM calculations.

I'm getting together a spreadsheet to calculate fundamentals, I've put in the figures from yahoo finance and I'm getting a target of -$51.50 per share.

It would be useful if i could check the figures i used against your figures

thansk
glen