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Common Cents Investment Group Monday January 27th Market Cycles & Investment Ratings
Agenda • Macro Update – Weiyi • Market Updates • Market Cycles – Max • Investment Ratings – Lindsey
Market Update • http://www.cnbc.com/id/101365510 • http://www.cnbc.com/id/101361746
Market Cycles Max Layman Disclaimer: past performance does not indicate future success
Market Trend • Movement in a certain direction over time • Secular – Long time frames • Primary – Medium time frames • Secondary – Short time frames • Identified with technical analysis of charts
Secular Trend • Lasts 5-25 years • Consists of a series of primary trends • Example: Secular Bull Market • Larger primary bull markets • Smaller primary bear markets
Primary Trend • Lasts 1 year or more • Broad support from entire market • Time frame typically talked about in media (i.e. CNBC) • 2013 was a bull market SPY +30%
Secondary Trend • Lasts few weeks to few months • “Market correction” • Markets down 4% in last week
Secondary Trend Cycle http://www.investopedia.com/articles/technical/04/050504.asp
Sector Rotation • Money moving from one industry to another http://blogs.stockcharts.com/.a/6a0105370026df970c01538decb605970b-pi
Full Recession • Bad time to be unemployed • Interest rates falling • Profitable Industries • Cyclicals & Transports (near the beginning) • Technology • Industrials (near the end) http://www.investopedia.com/articles/trading/05/020305.asp
Early Recovery • Rising Expectations • Interest rates bottomed out • Profitable industries • Industrials (near beginning) • Basic Materials • Energy (near end) http://www.investopedia.com/articles/trading/05/020305.asp
Late Recovery • Expectations decline • Interest rates rise rapidly • Profitable industries • Energy (near beginning) • Staples • Services (near the end) http://www.investopedia.com/articles/trading/05/020305.asp
Early Recession • Bad for overall economy, low expectations • Interest rates peaked • Profitable industries • Services (near the beginning) • Utilities • Cyclicals & Transports (near the end) http://www.investopedia.com/articles/trading/05/020305.asp
Kandi Technologies [KNDI] • Electric Vehicle (EV) technology • Renting cars • Cheaper than a taxi • Return to garages • Similar to Car2Go • Car vending machine http://www.youtube.com/watch?v=fiEJPbxL2hI
Investment Ratings Lindsey Kathmann
Warnings of Investment Ratings • Quantity is no guarantee of quality! • Analysts opinion is not the end all be all. • 2 Warnings: • Analysts' ratings do not have clear, standardized meanings. • Potential conflicts of interest that you, as an investor, should be aware of in assessing the usefulness to you.
Understanding the LanguageDifferent terms mean different things to different analysts http://www.marketwatch.com/tools/guide.asp
Understanding Analyst Loyalty • Some analysts can be unaffiliated but most are affiliated with financial institutions • Mutual Fund/Hedge Fund • Provide financial advice for intuitional clients whose investment decisions are usually much different than ordinary investors. • If the fund has a large holding in a particular stock, they do not want a “Sell” rating, so an analysts may put a “Hold” rating on it. This can cause inflation. • Analyst Compensation • Compensation can pressure analysts to report positive research • Ownership Interest in the Company • Analysts may hold stock in the company and do not want to see the rating go down.
Key Tips • Never rely on a rating alone. • Look at the entire report-not just the one word. The report will include risk factors you can use to help you make a decision. • Analysts differ in quality. • Not every analyst is the best. You can look up different analysts records online. • Is it right for YOU? • Your individual financial need is what matters most. Make sure you view each rating in terms of your unique financial situation. Bought:$10.56Sold: $13.87 Gain: ~31% over 2 yrs. Bank of America (BAC)
Stock Analysis Soda Stream