Investing and portfolio Analysis

1. Economy and Market analysis
Presented By
Sami ur Rahman
Ihsan ullah
Mudassir
Sayaf
MBA (3.5) 7th

2.  Dividend per share:
 Shows that how much profit are paid to
shareholders in a specific time period
 Higher the ratio, higher the performance of the
firm
 Can be calculated by
=Dividend paid/Number of outstanding shares
 Sometime we compare the previous year
performance with current

3.  Company dividend that how much dividend they
pay each year relative to its Market Price per Share
 Investor compare the dividend received with
current market share price
 Can be calculate by
=Annual dividend per share/ MPS
 When dividend or share price change, the yield also
change.
 Example:
◦ If a company share price is $20 and paying dividend $1
◦ And if a company share price is $100 and paying $1 dividend,
which one you will buy?

4.  Important ratio for investor because it shows the
confidence of investor
 Investors are more concern with future, rather then
past
 A low price-earning ratio means greater the risk
because of higher the ratio (low earnings)
 Higher leverage tends to produce low earnings
 Because higher leverage increases volatility in
earnings and hence greater the risk
 Increased uncertainty in earnings may depress the
stock price and hence produce a lower P/E

5.  it can be calculate by;
 =Market price per share/Earning per share
 While earnings per share can be calculated by,
=Net income – Preferred dividends/outstanding shares
 Outstanding shares are the amount of shares that
are currently held by the shareholders

6.  The business cycle reflects the movements in
economic activity as a whole
 business cycle have start and end points
 Economic activity starts in depressed condition and
ends in the recession
 NBER’s (national bureau of economic research)
defines the turning points of the businesses

7.  Composite economic indexes are used to indicate
peaks and toughs in the business cycle.
 Composite indexes are leading, coincident and
lagging
◦ Leading indexes are; stock prices, index of consumer
expectation, money supply, and interest rate spread
◦ Coincident indicators consist on industrial production and
manufacturing and trade sales
◦ Lagging indicators are the duration of unemployment,
commercial and industrial loans outstanding

8.  Stock market and business cycle have strong
relationship
 Bad economy– poor performance of the
companies– poor stock price
 Well economy– companies doing well– stock
market reflect well
 Stock prices typically turn before the economy
 Sometime market gives false signal
 As a famous joke is; “the market has predicted
nine out of the last five recession”

9.  Good economic forecast are of obvious significant
value to investor
 Good forecast of macroeconomic variables are very
useful
 Traditionally monetary policy has been assumed to
have an important effect on the economy

10.  Yield curve is the graphs plots between the maturity
or time and yield
 It show how interest rate (yield) vary from time to
time
 It reflect the bond trader
 Professional use the yield curve as an indicator of
how the Fed is managing the economy
 When Fed rises rates, a rate hike will come and the bull
market will stumble, bond yields will climb and the economy
will slip into a recession

11. •Flat in the graphs shows that economy is going down, in fact
businesses are going down
•Every business have end stage

12.  Market index simply refers to; aggregates of all
security prices
 Measure by some index or average of stock prices
 E.g. KSE 100 index
 Market measure show that whether the stocks are
moving up word or down word
 Some investor prefer to invest, if the stock market
is going up word

13.  Use by shareholders and investors
 If the market measures show up word
moment, it mean that market is performing
well