Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
STOP
Wasting Time
START
Adding Value2014-05-27
Target Prices Destroys Value
WARNING: Analysts are
Mainly Wrong
Part V: Man...
Pick stocks
Managing
a portfolio
Forecasting
Value drivers
Five factors of return
Risk matters more
Stop targets
Red...
RISK MATTERS
Risk management
matters more than
maximizing return
Markets rebound
- stocks not always
27 May 2014 3Source: ...
STOP TARGETS
AVOID
target prices
They
destroy
value
27 May 2014 4Source: A. Stotz Investment Research
CAN AN INVESTOR RELY ON
TARGET PRICES TO MAKE MONEY?
Source: A. Stotz Investment Research
Started with 16,500 stocks in Asia ex-
Japan from year-end 2003 to 2013
Removed 9,000 stocks that were small, had
low tr...
27 May 2014 7
Methodology
Identify the 12-month expected return based on analyst
consensus target price
Compare this to ...
ANALYSTS ARE OVERLY OPTIMISTIC
27 May 2014 8Source: A. Stotz Investment Research
WHAT DOES ACCURATE
MEAN TO YOU?
27 May 2014 9Source: A. Stotz Investment Research
This is our definition of
an accurate ta...
“Right” 18% of the stocks
“Right” 35% of the stocks
ANALYSTS IN ASIA WERE
OVERLY OPTIMISTIC
27 May 2014 10Sources: A. Stot...
ANALYSTS
CAN’T PREDICT
TURNING POINTS
27 May 2014 11Source: A. Stotz Investment Research
ANALYSTS CAN’T PREDICT
TURNING POINTS
27 May 2014 12Sources: A. Stotz Investment Research, FactSet
 In Asia, only 18% of the time were analysts’ targets
accurate
 On about half of all stocks the average analyst
missed h...
Share this with your friends
www.andrewstotz.com
Follow
me on:
Upcoming SlideShare
Loading in …5
×

Managing a Portfolio I - Stop Wasting Time, Start Adding Value, Part V

12,734 views

Published on

In six parts Andrew Stotz will teach you how to Stop Wasting Time and Start Adding Value on the two topics: Stock picking and Managing a portfolio.

In the last two parts the focus will be on managing a portfolio. In this fifth part YOU will learn why target prices destroys value and how accurate financial analysts are in their predictions.

Published in: Economy & Finance, Business
  • Hello! High Quality And Affordable Essays For You. Starting at $4.99 per page - Check our website! https://vk.cc/82gJD2
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here

Managing a Portfolio I - Stop Wasting Time, Start Adding Value, Part V

  1. STOP Wasting Time START Adding Value2014-05-27 Target Prices Destroys Value WARNING: Analysts are Mainly Wrong Part V: Managing a Portfolio I
  2. Pick stocks Managing a portfolio Forecasting Value drivers Five factors of return Risk matters more Stop targets Reduce action Every day is new 27 May 2014 2 In six parts Andrew Stotz will teach how to Stop Wasting Time and Start Adding Value in stock picking and portfolio management. In Part V & VI the focus will be on portfolio management. Source: A. Stotz Investment Research
  3. RISK MATTERS Risk management matters more than maximizing return Markets rebound - stocks not always 27 May 2014 3Source: A. Stotz Investment Research
  4. STOP TARGETS AVOID target prices They destroy value 27 May 2014 4Source: A. Stotz Investment Research
  5. CAN AN INVESTOR RELY ON TARGET PRICES TO MAKE MONEY? Source: A. Stotz Investment Research
  6. Started with 16,500 stocks in Asia ex- Japan from year-end 2003 to 2013 Removed 9,000 stocks that were small, had low trading volume or were inactive during any of the years Then removed the 2,200 China A-shares stocks, leaving 5,300 available stocks Our tested universe had 1,200 stocks which, over the 10 years, were covered by at least three analysts and had target prices 27 May 2014 6 CAN AN INVESTOR RELY ON TARGET PRICES TO MAKE MONEY? Source: A. Stotz Investment Research
  7. 27 May 2014 7 Methodology Identify the 12-month expected return based on analyst consensus target price Compare this to the actual return over that period and look at the difference. We repeat this every month to consider analysts’ adjustments over the year Average the results that we get across the period Make a histogram of intervals of consensus accuracy CAN AN INVESTOR RELY ON TARGET PRICES TO MAKE MONEY? Source: A. Stotz Investment Research
  8. ANALYSTS ARE OVERLY OPTIMISTIC 27 May 2014 8Source: A. Stotz Investment Research
  9. WHAT DOES ACCURATE MEAN TO YOU? 27 May 2014 9Source: A. Stotz Investment Research This is our definition of an accurate target
  10. “Right” 18% of the stocks “Right” 35% of the stocks ANALYSTS IN ASIA WERE OVERLY OPTIMISTIC 27 May 2014 10Sources: A. Stotz Investment Research, FactSet
  11. ANALYSTS CAN’T PREDICT TURNING POINTS 27 May 2014 11Source: A. Stotz Investment Research
  12. ANALYSTS CAN’T PREDICT TURNING POINTS 27 May 2014 12Sources: A. Stotz Investment Research, FactSet
  13.  In Asia, only 18% of the time were analysts’ targets accurate  On about half of all stocks the average analyst missed his target by more than 30% - WOW!  Analysts can’t predict turning points  Abandon any reliance on target prices, maybe even stop making them 27 May 2014 13 WHAT WE HAVE LEARNED Source: A. Stotz Investment Research
  14. Share this with your friends www.andrewstotz.com Follow me on:

×