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ANALYSIS
Mohammed Umair
FUNDAMENTAL ANALYSIS
Fundamental analysis can be composed of many different aspects:
the analysis of the economy as the whole, the analysis of an
industry or that of an individual company.
ECONOMY ANALYSIS
The performance of a company depends much on the performance
of the economy if the economy.
The first step to this type of analysis includes looking at the
macroeconomic situation.
INDICATOR
FAVOURABLE
IMPACT
UNFAVOURABLE
IMAPACT
GDP/GROWTH RATE
DOMESTIC SAVINGS
RATE
HIGH
LOW
INTEREST RATES
LOW
HIGH
TAX RATES
LOW
HIGH
INFLATION
LOW
HIGH
IIP/INDUSTRIAL
PRODUCTION
HIGH
LOW
BALANCE OF TRADE
POSITIVE
NEGATIVE
BALANCE OF
PAYMENTS
POSITIVE
NEGATIVE
FAVOURABLE
IMPACT
UNFAVOURABLE
IMAPACT
FOREIGN EXCHANGE
POSITION
HIGH
LOW
DEFICIT
FINANCING/FISCAL
DEFICIT
LOW
HIGH
AGRICULTURAL
PRODUCTION
HIGH
LOW
INFRASTRUCTURAL
FACILITIES
GOOD
NOT GOOD
Company Analysis
It involves a close investigative scrutiny of the companies financial
and non financial aspects with a view to identifying its strength,
weaknesses and future business prospects.
Aspects
: Technology,
Review
Questions
Strengths
Weaknesses
Latest Technology
Lower delivered Cost
Loose controls
Established products
Committed manpower
Advantageous location
Strong finances
Family funds
Opportunities
Weaknesses
Growing domestic
demand
Price War
Expanding export
markets
Undependable component
Cheap labour
Booming capital markets
Low interest rates
Intensive competition
Suppliers
Infrastructure bottlenecks
Power cuts
SWOT
ANALYSI
S
FACEBOOK SWOT
Industry intelligence
An industry intelligence is a business tool carried out to assess profit potential and
the complexity of a particular industry.
1. Industry intelligence is assessed based of key factors relating to the industry
such as the history of the industry,
2. Analysis of the industries financial performance,
3. Industry life cycle,
4. A review of how differing trends such as seasonal fluctuations affect the
industry,
5. External influences on the industry such as government laws and
6. A review of levels of competition both present and future for the specific
industry.
Industry intelligence
An industry intelligence is a business tool carried out to assess profit
potential and the complexity of a particular industry.
Industry intelligence is assessed based of key factors relating to the
industry such as the history of the industry,
analysis of the industries financial performance,
industry life cycle,
a review of how differing trends such as seasonal fluctuations affect the
industry,
external influences on the industry such as government laws and
a review of levels of competition both present and future for the specific
industry.
Competitors intelligence
Competitors intelligence in international business is an assessment of
the strengths and weaknesses of current and potential competitors.
It involves primarily two activities:
1. obtaining information about important competitors and
2. using that information to predict competitor behavior.
Most firms face four basic types of Competition:
Soft Drinks
Movies
Colleges
Need
Brand
Competitors
Transportation
Jeeps,
Rental cars,
Hatchbacks, SUVs, Bikes, BMTC,
Minivans, MUVs
Metro.
Coca-Cola, Pepsi,
Tropicana, Frooti
Minute Maid, Appy
Tea, Coffee,
Badam Milk, Fruit
Juice, Lime soda,
Butter milk.
Tap water,
Prasadam
(given in
religious places)
Avengers,
Cable TV, Pay-perSpiderman, Ice
view on DTH, DVD
age, Shrek,
rentals
Batman, Immortals,
Mission Impossible.
Sporting events
like IPL, Music
Concerts,
Exhibitions,
Melas.
Relative and
friends house,
reading, Parks,
Museum.
Books, Internet,
Apprenticeship,
Seminars.
Public Colleges
Refreshment
Entertainment
Education
Product
Competitors
Distance
Education,
Community
college.
Generic
Total Budget
Competitors Competitors
Profitability
A.(a) Gross profit Margin
(b) Net profit Margin
(c) Earning power
(d) Return on equity
(e) Earning per share
(f) Cash EPS
B. Financial Statement Analysis
Trading, P& L A/C Analysis
Balance Sheet Analysis
C.
Ratio Analysis
Liquidity Ratios
Leverage Ratios
Profitability Ratios
Activity / Efficiency Ratio
Investment decision:
1. If the market price of a share is currently lower than its intrinsic
value, such a share would be bought because it is perceived to be
under-priced.
2. A share whose current market price is higher than its intrinsic value
would be considered as overpriced and hence sold.
YESTERDAYS
BLUE CHIPS
EMERGING
BLUE CHIPS
LQ
HP
HQ
HP
MQ
MP
LQ
LP
NON
BLUE CHIPS
EVERGREEN
STOCK
HQ
LP
TURN AROUND
STOCK
QUALITY
PRICE QUALITY
MATRIX
PRICE QUALITY
MATRIX
a. Feature:
Medium Quality, Medium - Price (MQMP): These are steady
scrip's.
b. Should we buy:
Dont be in a hurry to sell them.
c. But Why?
They can last for two to three generations fairly intact. Hold on to
them.
TECHNICAL
ANALYSIS
What to Expect?
a. Introduction to Technical Analysis
b. 3 Hours is too less a time to expect anything w.r.t Technical Analysis,
theres too much out there
c. Expect just an introduction to what is technical analysis
d. Get yourself convinced by end of the presentation that technical
analysis is good enough to buy and sell stocks.
Introduction
Should I take a long position? Should I take a
short position? What is going to be the price
tomorrow, next week or next year?
John J. Murphy:
TA is the study of market action, primarily through the use of charts, for
the purpose of forecasting future price trends.
Bottom Line:
Technical analysis is a method to predict the future behaviour of securities, with
the use of past data.
How to do Technical
Analysis?
Trend
time horizons that vary greatly
Do charts
Speak?
Do charts Speak?
Consider the basic assumptions presented by Robert D. Edwards and John
Magee in the classic book, Technical Analysis of Stock Trends:
Stock prices are determined solely by the interaction of demand and supply.
Stock prices tend to move in trends.
Shifts in demand and supply cause reversals in trends.
Shifts in demand and supply can be detected in charts.
Chart patterns tend to repeat themselves.
2. Bar charts
3. Candlestick
s
care
about
Candlesticks
High
Close
Open
Open
Close
Low
Standard
Bar Chart
Low
Japanese
Candlestick
Standard
Bar Chart
Japanese
Candlestick
Open
High
Low
Close
Line Chart
A style of chart that is created by connecting a series of data
points together with a line.
This is the most basic type of chart used in finance and it is
generally created by connecting a series of past prices together
with a line.
A line chart can give the reader a fairly good idea of where the
price of an asset has traveled over a given time frame.
Infosys
Right Shoulder
Left Shoulder
Inverse Head-and-Shoulders
This is a reversal pattern, meaning
that it signifies a change in the trend.
Neckline
H&S Bottom
Neckline
Left Shoulder
Right Shoulder
Head
Sell
Signal
Support
Level
Buy
Signal
support
Level
Double Top
Target
Target
Double Bottom
Trends
The meaning of trend in finance isn't all that differentfrom
the general definition of the term - a trend is really nothing
more than the general direction.
Types of Trend
Uptrends
Types of Trend
Downtrend
Types of Trend
Sideways Trend
Traders
Breakout
The
Traders Remorse
Returning
Moving Averages
A simple moving average is formed by computing the average
(mean) price of a security over a specified number of periods.
While it is possible to create moving averages from the Open, the
High, and the Low data points, most moving averages are created
using the closing price.
For example: a 5-day simple moving average is calculated by
adding the closing prices for the last 5 days and dividing the total
by 5.
Moving Averages
An indicator is anything that can be used to predict future
financial or economic trends.
Leading (Bullish)-Above average
Leading - These types of indicators signal future events.
Moving Averages
DOW
THEORY
Bhavishyavaani of Stocks
Introduction
and
Historical
Perspective
Dow
Theory
Dow himself never
used the term Dow
theory nor
presented it as a
trading system.
Secondary Trend
The intermediate trends are corrective movements, which may last
for three weeks to three months. The primary trend may be
interrupted by the intermediate trend.
Minor Trend
The short term trend refers to the day to day price movement.
Primary
Trend
The "main
movement",
primary
movement or
major trend
may last
from less
than a year
to several
years. It can
be bullish or
bearish.
The first phase is the accumulation phase, where the asset quietly
goes up without too much attention being paid by the general
public, and few people participate. This is the dirt cheap phase of
gold when only true believers assumed positions
Uptrend
Primary
Market)
Upward
Trend
(Bull
Uptrend
Primary
Market)
Downward
Trend
(Bear
Summary
1. The market has three movements
2. Market trends have three phases
3. The stock market discounts all news
4. Stock market averages must confirm each other
5. Trends are confirmed by volume
6. Trends exist until definitive signals prove that they have
ended
EFFICIENT
MARKET
HYPOTHESIS
The Collective Wisdom
Concept
A market theory that evolved from a 1960's Ph.D. dissertation
by Eugene Fama.
The general concept of the efficient markets hypothesis
is that financial markets are "informationally efficient" In other words, that asset prices in financial markets
reflect all relevant information about an asset.
In consequence of this, one cannot consistently achieve returns
in excess of average market returns on a risk-adjusted basis,
given the information available at the time the investment is
made.
The news of the split drove the stock price down to Rs1,560 on
15th December from a high of Rs2,062 on 30th Novembera
24% fall in a fortnight.