Feb 5 2010 Sap

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  • From last evaluation excel sheet
  • Feb 5 2010 Sap

    1. 1. Stock Analyst Program 2010 Driss Kaitouni [email_address] Jamie Tucker [email_address] Honours in Investment Management, Wharton Exchange Fall 2009 February 5, 2010
    2. 2. Winter 2010 Overview <ul><li>Meeting every Friday at 2pm (will strive for a consistent room to meet) </li></ul><ul><li>We will start with introductory material and finish with an open discussion </li></ul>Stock Analyst Program 2010 Date Topic Date Topic Jan 29 Overview, Valuation, Resources to Start Mar 5 More Applied Valuation Feb 5 What is Price Action? Multiples Analysis Mar 12 Applied Technical Analysis (equities, commodities, FX) Feb 12 Stock Screening & Strategy/Money Management Mar 19 TBD Feb 19 Cancelled: Reading Week Mar 26 TBD Feb 29 Cancelled: Reading Week Apr 2 Final SAP Presentations
    3. 3. Agenda <ul><li>Research Report Overview </li></ul><ul><li>Multiples Analysis </li></ul><ul><li>How To Start… </li></ul><ul><li>Discussion </li></ul>Stock Analyst Program 2010
    4. 4. Research Report Overview
    5. 5. Research Report Composition <ul><li>The key to writing a coherent SAP research report is understanding and articulating an investment time horizon </li></ul><ul><ul><li>- Refer to previous reports on the MIC website: Resources > SAP References </li></ul></ul>Stock Analyst Program 2010
    6. 6. Evaluation Criteria (1) <ul><li>Choice of industry articulated relative to other industries that would be affected by the general economy in a similar way. For example, the drug delivery industry and the drug manufacturing industry are affected by the same external economic conditions; thus it should be clear as to why one versus the other. </li></ul><ul><li>This would include use of ratios specific to industry, dcf valuation, comps, precedents, etc... This would also include quantifiable identification of relevant catalysts and earnings growth potential specific to the company. </li></ul>Research Report Evaluation Stock Analyst Program 2010
    7. 7. Price Action
    8. 8. Price Action Level II Quotes Stock Analyst Program 2010
    9. 9. Price Action Cliffs Stock Analyst Program 2010
    10. 10. Price Action Cliffs Stock Analyst Program 2010
    11. 11. Price Action Gravity & physics <ul><li>Positive relation between time length of range and strength of move following it </li></ul><ul><ul><li>Volatility = return vs Stagnating prices = opportunity cost of capital </li></ul></ul><ul><li>~30% of time prices move in a trend </li></ul><ul><li>~60% of the time prices move in a counter-trend (range) </li></ul><ul><li>~10% of the time prices move in breakout </li></ul>Stock Analyst Program 2010
    12. 12. Multiples Analysis
    13. 13. Multiples Analysis P/E Stock Analyst Program 2010
    14. 14. Multiples Analysis <ul><li>Rationale? Belief that earnings are chief driver of value. </li></ul><ul><li>English language terms: how much investors are willing to pay per dollar of earnings </li></ul><ul><ul><li>Or, a reflection of the market’s optimism concerning a firm’s growth prospects </li></ul></ul><ul><li>Problems </li></ul><ul><ul><li>1) Management discretion </li></ul></ul><ul><ul><li>2) If earnings negative </li></ul></ul><ul><ul><li>3) Non-recurring items </li></ul></ul><ul><li>Factors: </li></ul>P/E Source: Prof. J. Scott (FSA ) Stock Analyst Program 2010 Higher P/E Lower P/E Firm risk Low High Earnings growth High Low Earnings quality High Low
    15. 15. Multiples Analysis <ul><li>Not useful by itself; must compare to market, industry, the past </li></ul><ul><li>Good industry resource: http://biz.yahoo.com/p/industries.html </li></ul><ul><li> </li></ul>P/E Source: BCA, Tigran Karapetian Stock Analyst Program 2010
    16. 16. Multiples Analysis EV/EBITDA Stock Analyst Program 2010
    17. 17. Multiples Analysis P/B Stock Analyst Program 2010
    18. 18. Multiples Analysis <ul><li>Hard to find comparable peer firms – subjectivity… </li></ul><ul><li>Dependence on accounting policies –differ by jurisdiction (US GAAP vs. rest of world) </li></ul><ul><li>Cyclicality of earnings, timing of year end </li></ul><ul><li>Discriminates against firms with negative equity </li></ul><ul><li>Hard to conduct sensitivity analysis </li></ul><ul><li>Nonetheless, a great way to start your analysis! </li></ul>Issues Stock Analyst Program 2010
    19. 19. How to Start…
    20. 20. How to Start… <ul><li>Macroeconomy </li></ul><ul><ul><li>David Rosenberg, Chief Economist & Strategist, Gluskin Sheff </li></ul></ul><ul><ul><ul><li>Go to GluskinSheff.com to sign up for morning newsletters (often bearish) </li></ul></ul></ul><ul><ul><li>SeekingAlpha.com > The Macro View (can e-mail subscribe) </li></ul></ul><ul><ul><li>Economist.com > Business and Finance </li></ul></ul><ul><li>Industry Analysis [VPN required] </li></ul><ul><ul><li>http://www.mcgill.ca/library/library-findinfo/subjects/management/industry/ > NetAdvantage > Industry Reports </li></ul></ul><ul><ul><ul><li>Or, > Mergent Online > Industry Reports </li></ul></ul></ul><ul><ul><li>Bloomberg terminal: RSE <go> > Search by Industry </li></ul></ul><ul><ul><li>SeekingAlpha.com > Stocks & Sectors </li></ul></ul><ul><li>Company Analysis </li></ul><ul><ul><li>Finviz.com > Screener </li></ul></ul><ul><ul><li>Google.com/finance > Screener </li></ul></ul><ul><ul><li>http://www.mcgill.ca/library/library-findinfo/subjects/management/industry/ > ValueLine [old school, but great info in one page] </li></ul></ul><ul><ul><li>Bloomberg terminal: ‘ticker’ <go> > Fundamentals & Estimates > ANR </li></ul></ul>Important Resources Stock Analyst Program 2010
    21. 21. How to Start… <ul><li>DCF Starting point </li></ul><ul><ul><li>Bloomberg terminal: 3) Fundamentals & Estimates > FA </li></ul></ul><ul><ul><li>Company 10-K and 10-Q filings (available at edgar.com) </li></ul></ul><ul><ul><li>Analyst reports (Thomson Investext) </li></ul></ul><ul><ul><ul><li>Often have DCF analysis built into reports </li></ul></ul></ul><ul><ul><ul><li>http://research.thomsonib.com/gaportal/login.asp [VPN necessary] </li></ul></ul></ul><ul><li>Multiples starting point </li></ul><ul><ul><li>Bloomberg terminal: 3) Fundamentals & Estimates > RV </li></ul></ul><ul><ul><li>Finviz.com > Screener </li></ul></ul><ul><ul><li>http://biz.yahoo.com/p/industries.html </li></ul></ul>Important Resources Stock Analyst Program 2010
    22. 22. Research Report Composition <ul><li>Meeting every Friday at 2pm (will strive for a consistent room to meet) </li></ul>Date Topic Date Topic Jan 29 Overview, Valuation, Resources to Start Mar 5 More Applied Valuation Feb 5 What is Price Action? Multiples Analysis Mar 12 Applied Technical Analysis (equities, commodities, FX) Feb 12 Stock Screening & Strategy/Money Management Mar 19 TBD Feb 19 Cancelled: Reading Week Mar 26 TBD Feb 29 Cancelled: Reading Week Apr 2 Final SAP Presentations Stock Analyst Program 2010

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