Microsoft PowerPoint - tutorial_idea_validation

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Microsoft PowerPoint - tutorial_idea_validation

  1. 1. GuruFocus Tutorial (II) – Value Idea Validation http://www.gurufocus.com Created: Dec. 2009 Updated: May 2010
  2. 2. What Can GuruFocus Do For You? Stock Idea Generation – see Tutorial I Guru Stock Picks and Holdings Insider Buys Value Investing Screeners Monthly Newsletters • Ben Graham NCAV Letter • Buffett-Munger Bargain Letter Stock Idea Validation – This tutorial What Gurus are doing with the stock What Insiders are doing with the stock Valuation: • Absolute valuation – DCF Model • Historical valuation – 10-year P/E, P/B, P/S ratios • Relative valuation – Comparable companies • Compare with related companies Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 2
  3. 3. Executive Summary - Stock Idea Validations What Gurus are doing with the stock What insiders are doing with it 10-year financial history Valuations: Absolute valuation with DCF calculator Historical valuation history – p/e, p/s, p/b Relative valuations: how other companies in the same industry are valued Peer opinions – how others value this company Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 3
  4. 4. TAB 1 - Guru & Insider Trades & Ownership (I) Tab 1 Business Predictability Rank Recent quarter Guru Trades Earlier Guru Trades Premium Gurus trade does not show up, unless he/she is in your personalized list. History Button to show holding history Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 4
  5. 5. TAB 1 - Guru Trades & Ownership (II) Guru current ownership (Real time picks updated as it happens. Others updated quarterly) Premium Gurus holdings does not show up, unless he/she is in your personalized list Insider Trades Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 5
  6. 6. Holding History of Gurus Click on the history button to show the holding history of the gurus with this position Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 6
  7. 7. TAB 2 – 10-Year Financial History (I) TAB 2: 10 year and 40 quarters of financial data Balance sheet Income statement Cashflow statement Per share data Graphic display of any data in the page, overlap multiple charts Every row can be clicked open to display in charts. Say next slide Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 7
  8. 8. TAB 2 – 10-Year Financial History (II) Every row of data can be clicked open to display a chart Like this Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 8
  9. 9. TAB 3 - Absolute Valuation – DCF Calculator (I) TAB 3 – Intrinsic value calculation with Discounted cash flow model All parameters (eps, growth rate, discount rate, years to grow etc) can be adjusted at your preferences, and the calculator updates automatically (See next slide for details) Margin of Safety is calculated automatically Default parameters like earning per share, growth rate, book value are from the financial data in TAB 2 Default Terminal Growth Rate is 4%, and Default discount rate is 12% Financial data is give to help users set the parameters. Intrinsic values of related companies are calculated automatically with the same growth rates and discount rate, but their own earning per share. The respective Margin of Safety is given. Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 9
  10. 10. TAB 3 - Absolute Valuation – DCF Calculator (II) In the example of JNJ Default Settings: Smaller Discount Rate Less optimistic on growth Higher Terminal Growth •From financial data: From financial data: •From financial data: •From financial data: •Eps: $4.55 •Eps: $4.55 •Eps: $4.55 •Eps: $4.55 •Growth rate: 13.5% •Growth rate: 13.5% •Growth rate: 10% •Growth rate: 13.5% •Book value: $13.9 •Book value: $13.9 •Book value: $13.9 •Book value: $13.9 •Discount rate: 12% •Discount rate: 10% •Discount rate: 12% •Discount rate: 12% •Terminal growth rate: 4% •Terminal growth rate: 4% •Terminal growth rate: 4% •Terminal growth rate: 6% Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 10
  11. 11. TAB 4 - Historical Valuation (I) TAB 4 - Historical p/e, p/s, p/b and dividend yield is displayed to compare current valuation with historical valuations The p/e, p/s and p/b ratios over the past 10 years are calculated to find out historical maximum and minimums Lines are drew at both the historical maximum p/e and the minimum p/e. Similar lines are drew for p/s, p/b ratios. Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 11
  12. 12. TAB 4 - Historical Valuation (II) Click on the legend, each of lines can be turned on/off. In the example at the right side, p/s and p/b lines are turned off Historical maximum p/e (31) and minim p/e (12.3) lines are displayed. These two lines form a band of historical p/e ratio movement of JNJ Historical p/e lines are not horizontal straight lines because earnings are changing Historical high p/e (p/e=31) Historical low p/e (p/e=12.3) In the case of JNJ, apparently it is at its low end p/e ratio as of today Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 12
  13. 13. TAB 4 - Historical Valuation (III) A lot of times p/e is not a good indicator of stock value, as profit margin can vary over business cycles In this case, p/s and p/b can be good references of stock valuations Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 13
  14. 14. TAB 4 - Historical Valuation (IV) A two-chart mode can be enabled by clicking the tab lower In this example, historical p/s ratio is displayed Quarterly sales are displayed here Two-chart mode can have many combinations. Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 14
  15. 15. TAB 5 – Compare: Relative Guru Trades & Valuation TAB5 - Compare with competitors on Guru Trades and market valuations Compare companies with similar valuation matrix Type in any combination of symbols to compare with other companies Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 15
  16. 16. TAB 6 – Fair Value Votes TAB 6 – Fair value votes of other users You can ask other users why they voted for the value Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 16
  17. 17. Premium Membership Premium Members ($249/year) have full access to the all the features described in this presentation. 7-day Free Trial The Secured link for signing up: https://www.gurufocus.com/membership/ upgrade.php Copyright: GuruFocus.com, LLC. GuruFocus.com – stock picks and market insight of Warren Buffett Gurus 17

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