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Academy 6 Fundamental analysis

Academy 6 Fundamental analysis. Get connected to B&R Beurs @. Announcement. ABN Amro Turbo Assignment 15 December. Question :. Who in the world of investment is well known for using fundamental analysis?. Answer. Warren Buffett. Introduction. What is it? Qualitative Quantitative

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Academy 6 Fundamental analysis

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  1. Academy 6 Fundamental analysis Get connected to B&R Beurs @

  2. Announcement • ABN Amro Turbo Assignment • 15 December

  3. Question: Who in the world of investment is well known for using fundamental analysis?

  4. Answer • Warren Buffett

  5. Introduction • What is it? • Qualitative • Quantitative • Strategies • Where to find it?

  6. Fundamental analysis • Important: • Cornerstone investing • Making a proposal • No irrationality

  7. No irrationality

  8. http://www.investopedia.com/video/play/understanding-fundamental-analysis/#axzz2DY0UGQmRhttp://www.investopedia.com/video/play/understanding-fundamental-analysis/#axzz2DY0UGQmR

  9. Basicquestions • Is the company’s revenue growing? • Is it actually making a profit? • Is it in a strong-enough position to beat out its competitors in the future? • Is it able to repay its debts? • Is management trying to ”cook the books"?

  10. Intristicvalue Intrinsic value versus market value?

  11. Intristicvalue Intrinsic value versus market value? “real value” - Long-run - Subjective Problems?

  12. Intrinsicvalue

  13. Criticism • Opposition • Technical analysis • Efficient market hypothesis • No free lunch • No long run outperformance • Solution?: • Combine technical and fundamental analysis

  14. Quantitativevsqualitative • Qualitative  surrounding business • Management • Business model • Problem? • Quantitative  Numerical • Profits • Assets • Cash flows

  15. Qualitative • First: Business model • Important question: • What does a company actually do? • Do you understand the product • Warren Buffet • Example Boston Chicken and Macdonalds Look at key drivers in sector - Future growth?

  16. Qualitative • Competitive adavantage • Long term succes • Example? • Models • Five forces model of Porter • SWOT analysis

  17. Qualitative Question first: • In who/what do you actually invest?

  18. Qualitative • Management • Leading the company • Planning and investing • Agency problems • Monitoring?

  19. Qualitative • Management • Monitoring • Conference calls • Magement discussion and analysis • Facts? • Ownership or insider sales • Past performance • Track record • Coporate governance • Transparancy • Where to find information?

  20. Quantitative • Industry • Financial statement • Balance sheet • Income statement • Cash flow statement

  21. Quantitative • Industry • Market share • Industry growth • Competition • Entry barriers • Pricing power • Regulation

  22. Question • What causes bankruptcy?

  23. Quantitative • Balance sheet • Snapshot of health • Assets vs. Liabilities

  24. Balance sheet • Aspect to look at: • Current assets • Liquidity? • Inventory turnover • Cash • Apple? • Current liabilities • Bankruptcy • Ratio’s • Current and quick ratio • Cash flow coverage

  25. Balance sheet • Aspect to look at: • Debt versus equity? • Off-balance sheet items • Intangibles  hard to measure • Patents • Goodwill • Brandname • R&D • DEBT!!

  26. Quantitative • Income statement • What is the most important part to look at? • A:Expenses • B: Profits • C: EBITDA • D: Revenue

  27. Quantitative • Income statement • EBITDA • Expenses • R&D? • Fixed or Variable? • Profit margin • Buffer

  28. Quantitative • Cash flow statement • Cash flows from operations • Cash flows from financing activities • Cash flows from investing activities

  29. Valuation

  30. Comparingwithindustry • Competitors • Comparing ratio’s

  31. Rule of thumbsfor safe investing • Share price should be no more than two-thirds of intrinsic worth. • Look at companies with P/E ratios at the lowest 10% of all equity securities. PEG should be less than one. • Stock price should be no more than tangible book value.

  32. There should be no more debt than equity (i.e. D/E ratio < 1). • Current assets should be two times current liabilities. • Dividend yield should be at least two-thirds of the long-term AAA bond yield. • Earnings growth should be at least 7% per annum compounded over the last 10 years.

  33. CAN SLIM strategy • Current earnings • Annual earnings • New (change) • Small firm • Leaders or laggard? • Institutional ownership • Market sentiment

  34. Information • Where to find it?

  35. Information • Where to find it? • Website companies • Financial reports • Analysts reports • Financial websites: • IEX • Bloomberg • Yahoo finance • Binck

  36. Financial report • What can we find in it?

  37. Financial report • What can we find in it? • Financial statements • Notes to the financial statements • Management discussion and analysis • Risks? • Clear? • Auditor’s report • Accuracy

  38. Example Example 1: www.dockwise.nl Example 2:www.infinancials.com/en/market%20valuation.html Example 3: www.finance.yahoo.com

  39. Recap • What is it? • Quantitative vs. Qualitative • Intrinsic value • Rule of thumbs • Strategies

  40. Next time • Technical analysis

  41. One Up on Wall Street, Peter Lynch • Random Walk Down Wall Street, Burton Malkiel

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