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How to Pick Stocks: Fundamentals vs. Technicals
![stock analysis assignment stock analysis assignment](https://educationcontent.schwab.com/sites/g/files/eyrktu1071/files/iStock_646694920_3x2_0.jpg)
Fundamental and technical analysis are two common ways to sort and pick stocks. How and when to use them can be a matter of personal style, but each has its strengths. Fundamental analysis attempts to identify stocks offering strong growth potential at a good price by examining the underlying company's business, as well as conditions within its industry or in the broader economy. Investors have traditionally used fundamental analysis for longer-term trades, relying on metrics like earnings per share (EPS), price-to-earnings (P/E) ratio , P/E growth, and dividend yield. Technical analysis , on the other hand, bypasses the underlying company's fundamentals and instead looks for statistical patterns on stock charts that might foretell future price moves. The idea here is that stock prices already reflect all the publicly available information about a particular company, so there's nothing to be gained from poring over a balance sheet, income statement, or other financial information. Given the focus on price and volume moves, traders have traditionally used technical analysis for shorter-term trades or to help identify entry prices on stocks where fundamental analysis has already been performed. But does it have to be an either/or proposition?
Which type of analysis is right for you?
Both fundamental and technical analysis can reveal potentially valuable information, and focusing on just one style could cause you to miss important clues about a stock's prospects. And because the intended duration of an investment or trade may change, using both forms of analysis is an approach you might consider. Why not deploy them so their strengths complement each other? For example, a trader might use fundamental factors to select the candidate and technical factors to identify a specific entry or exit price.
Growth investor's strategy
Growth investors focus on the future prospects of a particular company. Corporations are generally built to grow and turn a profit—and eventually return some of that profit to shareholders. Very few new companies are immediately profitable. But if a company reports strong revenue growth initially—even if it fails to turn a profit in its early days—growth investors may still decide it's a good prospect for the future. When investors decide a young company has an innovative product or compelling competitive advantage, they may start to drive the stock's price higher. The more investors who join the party, the higher the company's stock price is likely to rise. Such investors typically focus on metrics like a company’s historical and projected revenue growth rates when buying shares of relatively new companies.
Value investor's strategy
Value investors focus on whether the current stock price makes sense given the health of a particular company and typically seek companies that appear to be priced below what their revenues, EPS, or other fundamental metrics suggest. Such investors often focus on industry-leading companies, which are generally past their peak revenue growth years, because these companies often pay steady dividends. Value stocks tend to have low P/E ratios and pay above-average dividends, but they might trade at a price that is very low or below their book value (total tangible assets minus total liabilities). Sometimes value investing is described as investing in great companies at a good price, not simply buying cheap stocks.
Screening for growth or value
Schwab clients can use a stock screening tool on schwab.com under Research to help narrow a collection of stocks to a manageable list of quality growth or value candidates.
![stock analysis assignment The Research Tools subtab under Research on Schwab.com includes a Stock Screener in the Stocks section.](https://educationcontent.schwab.com/sites/g/files/eyrktu1071/files/Figure%201_16.png)
Source: Schwab.com
When screening for fundamental factors, consider focusing on stocks rated A or B by Schwab Equity Ratings ® because these are considered "buy" candidates relative to the other rated securities (C-F). In the example below, this step alone narrows the list of possible stocks from 2,800 candidates to 814 candidates.
![stock analysis assignment Schwab equity ratings A and B are the highest among the available ratings A through F.](https://educationcontent.schwab.com/sites/g/files/eyrktu1071/files/Figure%202_8.png)
Growth screening
Because Schwab Equity Ratings already takes many fundamental factors into account, investors searching for growth stocks could seek out stocks that have delivered strong revenue growth in the past and that appear set to deliver both strong revenue and profit growth in the future. In the example below, which screens for revenue growth over the last three years, current year earnings growth, and current year EPS growth, selecting these three additional criteria narrows the list of 814 candidates to just five.
![stock analysis assignment An example of a screen that identifies companies with revenue growth over the last three years of more than 25%, current year earnings growth of more than 25%, and current year EPS growth of more than 25%.](https://educationcontent.schwab.com/sites/g/files/eyrktu1071/files/Figure%203_4.png)
Value screening
You can use several other metrics when searching for value stocks, though a simple approach would be to consider those with:
- An above-average dividend yield (but not too high)
- Low P/E ratio
- A price that is less than the company’s book value
In the example below, selecting these three additional criteria shrinks the list of 814 down to 25.
![stock analysis assignment An example of a screen that identifies companies with annual dividend yields greater than 3%, P/E ratios less than 30, and price-to-book ratios less than one.](https://educationcontent.schwab.com/sites/g/files/eyrktu1071/files/Figure%204_2.png)
As you search, be wary of extremely high dividend-yielding stocks because they might be too good to be true. On a similar note, keep in mind that cheap doesn't necessarily mean good. A low stock price could be the result of a company's outdated products, bad management, expired patents, pending lawsuits, etc. Once you have a more manageable list of five or six, it's time to apply some technical screeners.
Selecting stocks using technical signals
Stock selection using technical analysis generally involves three steps: stock screening, chart scanning, and setting up the trade. With stock screening, your goal might be to arrive at a list of 20 or 25 candidates using a set of technical criteria. You could then try to narrow that list down to three or four candidates by scanning the charts for possible entries or points where it could make sense to buy. Finally, you'll perform a more detailed chart analysis and choose the one you may consider trading.
Screening stocks
To set up a screen, consider the following items:
- Price and market capitalization. This can be a good place to start because it allows you to eliminate a lot of stocks right away. For example, if you're not interested in stocks priced higher than $100, you could exclude them in the search.
- Sectors and industries. Many traders compartmentalize the stock market into broad sectors (technology, energy, financials, etc.), or going further, they break it into industry groups, like software, semiconductors, and computer hardware within the technology sector. Look for strong sectors and industry groups if you want to go long—that is, buy a stock with the expectation that its price will rise—and weak ones if you want to go short—which means borrowing and selling a stock whose price you think is going to fall, and then buying it back later at a lower price should it actually fall, all with the expectation that you’ll pocket the difference. Because short selling involves potentially unlimited risk if the underlying stock moves higher, it's considered an advanced strategy and requires a margin account.
- A simple moving average is calculated by averaging a stock's closing prices over a defined period. Many traders use 20 days as a starting point, but you can use different periods according to your trading style.
- A momentum trader going long might ask, is a stock trading above its 20-day moving average? Has its 20-day moving average broken above its 50-day moving average? A trader looking to short a stock might search for one trading below its 20-day moving average and has a 20-day moving average below its 50-day moving average. You might narrow the list further by looking for stocks that trade at least 200,000 shares per day.
Scanning charts
After compiling a list of candidates, it's time to look for those with good entry points. Two common entry strategies are either to look for breakouts in the direction of the trend—for example, stocks experiencing a sharp upward movement in price—or to look for pullbacks, which are short-term moves in the opposite direction of the longer-term trend. For breakouts on longs, an entry point could be the first or second new high after the stock has traded sideways for a few days. For breakouts on shorts, an entry point could be the first or second new low after a few days of sideways movement. With the pullback strategy, you may want to see the stock correct for a few days in the direction opposite the trend. You might then consider buying into that short-term weakness on the longs or selling into that short-term strength on the shorts.
Setting up the trade
We'll assume for the sake of discussion that you prefer pullback entries and have narrowed your choices down to two buy candidates, stock A and stock B. To choose between them, it could make sense to bring a few indicators to bear: price patterns, volume, moving averages, and an indicator called the stochastic oscillator. Because we're looking for pullbacks, our first task is to confirm a price change is likely to be a temporary move and not a full-on reversal. Chances of a trend reversal may be lower if the stock has pulled back to a support level, such as a moving average or an old low. However, this isn't a guarantee. We also want to know if a pullback is ending. For example, if a stock can push past the previous day's high, it could mean the uptrend is resuming. On to our charts. We can see that both stocks A and B have pulled back and held their 20-day moving averages (yellow lines). So far, so good.
![stock analysis assignment Stock A in an uptrend along a 20-day moving average with the stochastic oscillator between 20 and 80.](https://educationcontent.schwab.com/sites/g/files/eyrktu1071/files/Figure%205_1.png)
Source: thinkorswim® platform
![stock analysis assignment Stock B is in an uptrend above a 20-day moving average and on to new highs with the stochastic oscillator between 20 and 80.](https://educationcontent.schwab.com/sites/g/files/eyrktu1071/files/Figure%206.png)
Source: thinkorswim platform
Here's where we bring in the stochastic oscillator. Basically, this is a momentum indicator that compares a stock's current price to its highs and lows over a given period. Values can range from 0 to 100, with a reading higher than 80 indicating that the stock may be "overbought" and possibly overextended on the upside. Readings under 20 indicate that the stock is "oversold" and possibly overextended on the downside. On a chart, the stochastic oscillator consists of two lines: the %K (fast line, in red in the chart above) and %D (slow line, in blue). The former is the value for the current trading session. The latter is a three-day moving average of the former. When a stock is trading in a particular range, and the oscillator's values move into overbought or oversold areas, look for a price reversal. However, be warned that if a stock is strongly trending in a particular direction over a long period, the values could stay in overbought or oversold territory for an extended period. In either case, it can make sense to compare the %K and %D lines. If the lines are converging or diverging, it could signal a shift in momentum is in the works. Let's apply this to our hypothetical trade by looking at the last trading day for each stock. We can see that stock A was unable to trade above the previous day's high, either on an intraday or closing basis. Also, it traded in a narrow range and closed about where it opened, all signs that buyers lacked conviction. Looking closer, the %D line indicates stock A isn't oversold, which is good. However, the two lines haven't crossed—as you can see, %K is still below %D. If %K had crossed %D, that would show a little more upside strength. On a positive note, volume was relatively light: Heavy volume can be a danger sign when the stock moves in the opposite direction of the trend. The last trading day on stock B tells a different story. The stock not only traded above the previous day's high during the course of the trading day, but it also managed to close above it. Also, it had a wide-range day with a close near the top. These are all signs the buyers have gained control and the pullback is likely over, especially because this price action occurred on the back of higher-than-average volume. Also, the stochastic oscillator shows that neither %K nor %D are oversold, indicating strength. In addition, %K has crossed %D, which is another bullish sign. In sum: Stock B looks like the stronger candidate.
Simplify your stock selection
Stock selection doesn't have to be difficult, but you do need to be flexible. Look for markets that are moving but also be willing to hold off on a trade if the indicators aren't conveying a compelling setup. Consider going short as well as long. Finally, and perhaps most importantly, you need to be disciplined. Don't let the inevitable bad trades turn into a disaster. Keep your losses small and live to trade another day.
Just getting started with stocks?
More from charles schwab.
![stock analysis assignment stock analysis assignment](https://educationcontent.schwab.com/sites/g/files/eyrktu1071/files/Getty_1443437670_1x1.jpg)
Closing Market Update
![stock analysis assignment stock analysis assignment](https://educationcontent.schwab.com/sites/g/files/eyrktu1071/files/Getty_891619848_1x1.jpg)
Opening Market Update
![stock analysis assignment stock analysis assignment](https://educationcontent.schwab.com/sites/g/files/eyrktu1071/files/Getty_1471283314_1x1.jpg)
Sector Views: Monthly Stock Sector Outlook
Related topics.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
Investing involves risk, including loss of principal.
The information and content provided herein is general in nature and is for informational purposes only. It is not intended, and should not be construed, as a specific recommendation, individualized tax, legal, or investment advice. Tax laws are subject to change, either prospectively or retroactively. Where specific advice is necessary or appropriate, individuals should contact their own professional tax and investment advisors or other professionals (CPA, Financial Planner, Investment Manager) to help answer questions about specific situations or needs prior to taking any action based upon this information.
Schwab Equity Ratings and the general buy/hold/sell guidance are not personal recommendations for any particular investor or client and do not take into account the financial, investment, or other objectives or needs of, and may not be suitable for, any particular investor or client. Investors and clients should consider Schwab Equity Ratings as only a single factor in making their investment decision while taking into account the current market environment.
Supporting documentation for any claims or statistical information is available upon request.
Schwab Equity Ratings are assigned to approximately 3,000 of the largest (by market capitalization) U.S. headquartered stocks using a scale of A, B, C, D and F. Schwab's outlook is that A-rated stocks, on average, will strongly outperform and F-rated stocks, on average, will strongly underperform the equities market over the next 12 months. Each of the approximately 3,000 stocks rated in the Schwab Equity Ratings universe is given a score that is derived from several research factors. The assignment of a final Schwab Equity Rating depends on how well a given stock scores on each of the factors and then how that stock stacks up against other stocks within the same sector and market cap group.
Schwab does not recommend the use of technical analysis as a sole means of investment research.
Short selling is an advanced trading strategy involving potentially unlimited risks, and must be done in a margin account. Margin trading increases your level of market risk. For more information please refer to your account agreement and the Margin Risk Disclosure Statement .
Past performance is no guarantee of future results.
The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.
Penny Stock Basics
Stock analysis: the basics + techniques, examples, & tools.
Stock analysis is often a definitive decision driver for any trader.
And top traders know to approach it from multiple angles. There are a few distinct, effective tips that can help you need to make informed, logical decisions in your stock analysis…
Examples: What are the best stock analysis websites? What are some stock market analysis techniques?
From there, you can get more specific. How do you analyze a stock? By its price or the company’s revenue? The latest press story?
There’s a lot to consider. Let’s take a look…
Table of Contents
- 1 What Is Stock Analysis?
- 2 How Do You Analyze a Stock?
- 3.1 Share Price Performance Analysis
- 4 Top Stock Analysis Tools and Software
- 5 Types of Stock Analysis & Techniques
- 6.1 Example of Technical Analysis of a Stock
- 7.1 What Is Stock Fundamental Analysis?
- 7.2 How Do You Do Fundamental Analysis of a Stock?
- 7.3 P/E Ratio
- 7.4 Earnings Per Share
- 7.5 PEG Ratio
- 7.6 Book Value
- 7.7 Return on Equity
- 7.8 Example of Fundamental Analysis of a Stock
- 8.1 An Example of Forex Analysis
- 9 Sentiment Analysis
- 10 Common Stock Analysis Mistakes
- 11.1 What Are Some Stock Research Tools?
- 11.2 Should You Avoid Stock Advice From Promoters?
- 11.3 What Is the Best Stock Analysis Website?
- 11.4 How Can I Learn Stock Analysis?
- 11.5 Why You Should Consider Applying for My Trading Challenge
- 12 Conclusion
What Is Stock Analysis?
Stock analysis is exactly what it sounds like, and it’s important to note it’s a process. It’s the method traders use to assess historical and present data to attempt to forecast stock prices.
You can look at how a stock performs in relation to itself over time, industry changes, or entire market changes. You might even compare a stock, company, or currency (we’ll get to that later) with others in the same industry. That can help you better understand price action.
How Do You Analyze a Stock?
![stock analysis assignment Tim Sykes studying and trading](https://content.timothysykes.com/cdn-cgi/image/quality=90,format=webp,width=740/https://content.timothysykes.com/wp-content/uploads/2020/06/Tim-Sykes-looks-into-promoted-penny-stocks.jpg)
Here are some things I ask myself when deciding which stock to buy:
- Does the stock have a history of spiking? I want to trade former runners with a history of big spikes. That way I can get in and out of the trade quickly.
- What’s the news? I like to trade stocks with exciting news catalysts that bring in more buyers, pushing the volume and price up.
- What’s the pattern? The stock needs to have a pattern, like a first green day or a breakout. I like stocks with no resistance overhead.
- Is there volume? I need the stocks I trade to have higher-than-normal volume. If the company releases news, but there’s no reaction or volume in the stock, I’m not interested.
(Ready to get started with penny stocks? Check out my free Penny Stock 101 Guide . And there’s “ The Complete Penny Stock Course .”My student Jamil put all my lessons in one easy-to-read book.)
How to Analyze Share Market Data
A lot of day traders analyze market data using stock charts. Here’s why…
Stock charts give can you a visual representation of the past price action of the stock. When a big percent gainer pops up on my scanner , the first thing I do is look back at the chart.
I’m looking at support and resistance levels, the previous volume traded, and whether there’s a pattern forming.
Then I can use this information to create a trading plan based on the past performance of the stock, the current news, and the volume .
Share Price Performance Analysis
![stock analysis assignment Post image](https://www.timothysykes.com/images/newsletter-image.911720f1.webp)
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Share price performance analysis is looking at the stock’s price action over a period of time.
If you’re thinking of holding a stock overnight, you’ll want to look back at the stock’s previous price performance. Does it have a history of gapping up the next day or does it usually fail?
If you understand how a stock has moved in the past, you can better prepare for how it might move in the current market.
Top Stock Analysis Tools and Software
The most important tool you’ll use for technical analysis is your charting software . Your broker will have a platform for you to start with, but try out others and see what you like.
I recommend StocksToTrade . I helped design it, so it’s made specifically for the low-priced volatile stocks I love to trade. It has amazing tools and built-in watchlists to help you find the best stocks to trade for your strategy.
(Full disclosure: I helped develop StocksToTrade and I’m a major investor. That said, it’s my dream stock-scanning tool. It’s designed to help save time in finding the best stocks that fit my patterns and strategy.)
Try it out with a 14-day trial for $7 .
![stock analysis assignment https://content.timothysykes.com/wp-content/plugins/wp-youtube-lyte/lyteCache.php?origThumbUrl=%2F%2Fi.ytimg.com%2Fvi%2FcXxDRYjms7k%2Fmaxresdefault.jpg](https://content.timothysykes.com/cdn-cgi/image/quality=90,format=webp,width=740/https://content.timothysykes.com/wp-content/plugins/wp-youtube-lyte/lyteCache.php?origThumbUrl=%2F%2Fi.ytimg.com%2Fvi%2FcXxDRYjms7k%2Fmaxresdefault.jpg)
Types of Stock Analysis & Techniques
There are two basic and distinctly different types of stock analysis: technical and fundamental.
When using these two methods, you’ll wear different hats:
- Technical Analysis — This is where your ‘economist hat’ comes into play. It’s where the primary focus is on the stock action itself.
- Fundamental Analysis — You wear your ‘business hat’ when using this method. Here, the spotlight is on the inner workings of the business and how its performance affects the respective stock price.
Let’s stop for a minute on fundamental analysis. Before you can begin to understand the performance of a business, you need to know the basics of how business finance works.
Without fundamental knowledge, you won’t have a foothold on how to properly use the data.
For example, if you don’t understand concepts like operating income or financial statements, now is a good time to familiarize yourself.
Technical Stock Analysis
Technical analysis is where you can use historical data from stock prices to help you with future price forecasts.
Here are three important key metrics to consider when performing a technical stock analysis:
- Market Action. Also known as price action, this is all about the price movement specific to a particular stock.
- Price Trend. When the price moves as expected for some time, it tends to fall into an observable trend. It’s considered a trend until the price suddenly moves from the range of expectation, then it’s deemed a broken trend.
- Patterns. Stock patterns fall under the adage that ‘history repeats itself.’ Some analysts track the patterns of stocks as far back as 100 years. And yes, the data is still relevant today. You have to study the past to trade smarter.
![stock analysis assignment https://content.timothysykes.com/wp-content/plugins/wp-youtube-lyte/lyteCache.php?origThumbUrl=%2F%2Fi.ytimg.com%2Fvi%2FT-_jjttg8Ss%2Fmaxresdefault.jpg](https://content.timothysykes.com/cdn-cgi/image/quality=90,format=webp,width=740/https://content.timothysykes.com/wp-content/plugins/wp-youtube-lyte/lyteCache.php?origThumbUrl=%2F%2Fi.ytimg.com%2Fvi%2FT-_jjttg8Ss%2Fmaxresdefault.jpg)
Example of Technical Analysis of a Stock
How can you better gauge potential price action using technical analysis?
Check out this example…
We’ll call a hypothetical stock XYZ. Let’s say XYZ is sitting at $50 per share and increases by $3 per share every quarter … Except it takes a dip of $1.50 per share during the fourth quarter each year. It’s been this way for the past four years.
With this data, a trader might estimate that they can potentially make $9 per share for the first three quarters of the year and lose that $1.50 per share by the fourth quarter. They’ll be ahead $7.50 by the end of the year if they hold onto that stock. Hypothetically, of course.
Fundamental Stock Analysis
![stock analysis assignment tim sykes lounging in arizona with laptop and food on lap](https://content.timothysykes.com/cdn-cgi/image/quality=90,format=webp,width=740/https://content.timothysykes.com/wp-content/uploads/2020/11/sykes-lounging-in-arizona-rental.jpg)
Here’s where you’ll don your ‘business hat.’
What Is Stock Fundamental Analysis?
This type of analysis involves looking at a business’s financial health and its effect on stock prices.
It uses key performance indicators such as cash flow trends, income statements, balance sheets, and the U.S. Securities and Exchange Commission (SEC) filings.
How Do You Do Fundamental Analysis of a Stock?
Fundamental analysis of a stock means you’ll dive deep into the company’s inner workings. It involves a lot of research into the companies past and current performance.
Financial statements provide insight and information into how the company is performing. Publicly traded companies typically provide information for shareholders on their websites and with the SEC.
Other sources you should seek out include media articles, blog posts, and company press releases. Is this business a few months away from releasing a new product into the market? Is there media buzz about it? Did they record profits last quarter, or did profits dive?
SEC Filings can be long and difficult to understand for a new trader or investor. Check out my DVD “ Read SEC Filings ” to help you read and analyze SEC filings. (It can be a bit boring, but the information is crucial. Try to stay awake!)
Other points to analyze include…
P/E ratio means the price-to-earnings ratio. It compares the company’s stock price relative to its earnings per share.
Earnings Per Share
One important measurement is the earnings per share (EPS). You can calculate the EPS by dividing a company’s profits by the number of common outstanding shares. Read more about EPS here.
Another parameter is earnings growth, which measures the growth of a company’s profits over time.
Finally, you have what’s called a price/earnings to growth ratio (PEG). This is the price-to-earnings divided by the growth rate of a company’s earnings over time.
PEG = PE Ratio ÷ Earnings Growth Rate
A company’s book value is the amount the company is worth if it were to be liquidated. If the company sold all its assets and paid off its debts, what’s left is the book value.
Return on Equity
Return on equity (ROE) is the company’s return on net assets. Here’s the calculation:
Net Income ÷ Shareholder Equity
The resulting number is a percentage that shows how well the company is using its assets to generate profits. An ROE of around 15% is considered good.
Example of Fundamental Analysis of a Stock
Penny stocks don’t always have a lot of fundamentals. They’re small, developing companies and they usually need money.
They use press releases and promoters to get their stock price up so they can sell more shares into the hype and pocket the money. That’s why I always warn traders never to believe the hype or get married to a company.
The best way to “fundamentally” (I use that term loosely) analyze a penny stock before you trade it is to check the SEC filings for outstanding warrants or shelf offerings.
![stock analysis assignment https://content.timothysykes.com/wp-content/plugins/wp-youtube-lyte/lyteCache.php?origThumbUrl=%2F%2Fi.ytimg.com%2Fvi%2FogrHEOCxJwQ%2Fmaxresdefault.jpg](https://content.timothysykes.com/cdn-cgi/image/quality=90,format=webp,width=740/https://content.timothysykes.com/wp-content/plugins/wp-youtube-lyte/lyteCache.php?origThumbUrl=%2F%2Fi.ytimg.com%2Fvi%2FogrHEOCxJwQ%2Fmaxresdefault.jpg)
Forex Analysis
Forex (foreign exchange market, often abbreviated FX) is specific to the trading of each of the world’s currencies based on their buying and selling prices. So you can guess that forex analysis is used to determine trends based on just that.
Currencies on the forex market are traded in pairs, and certain currency pairs are more commonly traded than others. When performing a forex analysis, you can use both technical AND fundamental analyses.
For more information on forex trading, check out this post .
![stock analysis assignment watchlist banner](https://content.timothysykes.com/cdn-cgi/image/quality=90,format=webp,width=740/https://content.timothysykes.com/wp-content/uploads/2018/09/banner-tim-skinny-2-3.jpg)
An Example of Forex Analysis
Let’s take the currency pair of both U.S. and Canadian dollars (US/CAD). Here, you’re looking at worldwide economic and political factors that might affect the supply and demand of an asset. Then, you’re analyzing how that might affect a currency pair.
For example, did “X” country just elect a new president? What’s the worldwide perception of this new president?
To gain another perspective on what’s really happening here, you can take a look at the economies of the two countries. You can also cross-reference this data with the economy of other countries not included in this pair.
Finally, don’t forget the sentiment analysis aspect…
Sentiment Analysis
Sentiment analysis examines the psychological state of others in the market. After all, let’s not forget that the market is made up of humans who have opinions, perceptions, fears, etc. I’ve stated before that market sentiment matters to short-term traders.
Common Stock Analysis Mistakes
![stock analysis assignment timothy sykes in arizona 2020](https://content.timothysykes.com/cdn-cgi/image/quality=90,format=webp,width=740/https://content.timothysykes.com/wp-content/uploads/2020/10/tim-sykes-in-arizona-with-laptop.jpg)
There are a few common mistakes people make when it comes to stock analysis.
- Analysis paralysis. You do all the research and study the charts … but when it comes time to place the trade, you freeze and can’t execute. Only to see the stock do exactly what you thought.
- Narrow focus. This when a trader becomes obsessed with tiny price fluctuations. If your trading plan was based on technical analysis, try to remember the big picture of your idea. And remember, this isn’t an exact science. Just because you see support at a certain level, that doesn’t mean the stock won’t dip slightly below and come back.
- Cutting losses . Some traders have a hard time accepting that they’re wrong. If you’ve done your research and you’ve studied the charts, and you still end up being wrong — that’s OK. Cut your losses and move on.
If you find yourself making these mistakes, don’t be too hard on yourself. It takes time to learn this stuff. Learning to trust the process is a HUGE part of it.
Frequently Asked Questions About Stock Analysis
What are some stock research tools.
Some popular stock research tools include trading and scanning platforms like StocksToTrade, financial news sites, financial statements, SEC filings, and earnings reports.
Should You Avoid Stock Advice From Promoters?
While it’s possible to use promoters’ actions to your trading advantage, you must be wary and prepared. Never buy into the hype. Definitely don’t hold and hope. Think of stock promoters as nothing more than stock marketers or salespeople.
What Is the Best Stock Analysis Website?
There are plenty of free stock analysis websites to help you find information. If you want to research a company’s fundamentals, search the company's website and the SEC website. Be sure to check several well-known, reputable sources for the validity of any news. It’s always best to do your own due diligence.
How Can I Learn Stock Analysis?
The best way to learn stock analysis is to STUDY. Find a mentor who can help you learn the markets and how to become a self-sufficient trader. Make sure they’re transparent and show every trade. I teach and trade the patterns I’ve learned from my 20+ years in the market.
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You might need to wear a few different ‘hats’ to perform stock analysis. But the important thing is to not lose sight of what you’re trying to do: figure out where the stock price might go next.
You can get wrapped up in the data from both the technical and fundamental sides. Don’t get too bogged down. Keep the big picture in mind. And remember that each piece of data should complement the other and hone into your overall goal and trading plan.
Whether it’s fundamental, technical, or sentiment analysis, you’re using those methods to help drive your decisions. Your ultimate goal is to help ensure that your decisions remain logical and calculated at all times.
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Timothy Sykes
* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here
The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.
A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.
A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.
A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.
These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .
Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.
Citations for Disclaimer
Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”
Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”
Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”
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Stock Research: How to Do Your Due Diligence in 4 Steps
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Stock research involves investigating a company's financials, leadership team and competition to figure out if you want to invest.
When doing stock research, it's helpful to know terms such as revenue, earnings per share and price-earnings ratio.
A good stock research site can help you find lots of information quickly and may even offer stock analysis.
Stock research is a lot like shopping for a car. You can base a decision solely on technical specs, but it’s also important to consider how the ride feels on the road, the manufacturer’s reputation and whether the color of the interior will camouflage dog hair.
What is stock research?
Stock research is a method of analyzing stocks based on factors such as the company’s financials, leadership team and competition. Stock research helps investors evaluate a stock and decide whether it deserves a spot in their portfolio.
» Looking for a lesson in how to buy stocks instead? We have a full guide to that here .
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4 steps to research stocks
One note before we dive in: Stocks are considered long-term investments because they carry quite a bit of risk; you need time to weather any ups and downs and benefit from long-term gains. That means investing in stocks is best for money you won't need in at least the next five years. (Elsewhere we outline better options for short-term savings .)
1. Gather your stock research materials
Start by reviewing the company's financials. This is called quantitative research, and it begins with pulling together a few documents that companies are required to file with the U.S. Securities and Exchange Commission (SEC):
Form 10-K: An annual report that includes key financial statements that have been independently audited. Here you can review a company’s balance sheet, its sources of income and how it handles its cash, and its revenues and expenses.
Form 10-Q: A quarterly update on operations and financial results.
Best stock research websites
The SEC’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) website provides a searchable database of the forms named above. It’s a valuable resource for learning how to research stocks.
Short on time? You’ll find highlights from the above filings and important financial ratios on your brokerage firm ’s website or on major financial news websites. (If you don't have a brokerage account, here's how to open one .) This information will help you compare a company’s performance against other candidates for your investment dollars.
» View our picks: The best online brokers for stock trading
2. Narrow your focus
These financial reports contain a ton of numbers and it's easy to get bogged down. Zero in on the following line items to become familiar with the measurable inner workings of a company:
Revenue: This is the amount of money a company brought in during the specified period. It’s the first thing you’ll see on the income statement, which is why it’s often referred to as the “top line.” Sometimes revenue is broken down into “operating revenue” and “nonoperating revenue.” Operating revenue is most telling because it’s generated from the company’s core business. Nonoperating revenue often comes from one-time business activities, such as selling an asset.
Net income: This “bottom line” figure — so called because it’s listed at the end of the income statement — is the total amount of money a company has made after operating expenses, taxes and depreciation are subtracted from revenue. Revenue is the equivalent of your gross salary, and net income is comparable to what’s left over after you’ve paid taxes and living expenses.
Earnings and earnings per share (EPS). When you divide earnings by the number of shares available to trade, you get earnings per share. This number shows a company’s profitability on a per-share basis, which makes it easier to compare with other companies. When you see earnings per share followed by “(ttm)” that refers to the “trailing twelve months.”
Earnings is far from a perfect financial measurement because it doesn’t tell you how — or how efficiently — the company uses its capital. Some companies take those earnings and reinvest them in the business. Others pay them out to shareholders in the form of dividends.
Price-earnings ratio (P/E): Dividing a company’s current stock price by its earnings per share — usually over the last 12 months — gives you a company’s trailing P/E ratio . Dividing the stock price by forecasted earnings from Wall Street analysts gives you the forward P/E. This measure of a stock’s value tells you how much investors are willing to pay to receive $1 of the company’s current earnings.
Keep in mind that the P/E ratio is derived from the potentially flawed earnings per share calculation, and analyst estimates are notoriously focused on the short term. Therefore it’s not a reliable stand-alone metric.
Return on equity (ROE) and return on assets (ROA): Return on equity reveals, in percentage terms, how much profit a company generates with each dollar shareholders have invested. The equity is shareholder equity. Return on assets shows what percentage of its profits the company generates with each dollar of its assets. Each is derived from dividing a company’s annual net income by one of those measures. These percentages also tell you something about how efficient the company is at generating profits.
Here again, beware of the gotchas. A company can artificially boost return on equity by buying back shares to reduce the shareholder equity denominator. Similarly, taking on more debt — say, loans to increase inventory or finance property — increases the amount in assets used to calculate return on assets.
» Want to make sense of stock charts? Learn how to read stock charts and interpret data
3. Turn to qualitative stock research
If quantitative stock research reveals the black-and-white financials of a company’s story, qualitative stock research provides the technicolor details that give you a truer picture of its operations and prospects.
Warren Buffett famously said: “Buy into a company because you want to own it, not because you want the stock to go up.” That’s because when you buy stocks, you purchase a personal stake in a business.
Here are some questions to help you screen your potential business partners:
How does the company make money? Sometimes it’s obvious, such as a clothing retailer whose main business is selling clothes. Sometimes it’s not, such as a fast-food company that derives most of its revenue from selling franchises or an electronics firm that relies on providing consumer financing for growth. A good rule of thumb that’s served Buffett well: Invest in common-sense companies that you truly understand.
Does this company have a competitive advantage? Look for something about the business that makes it difficult to imitate, equal or eclipse. This could be its brand, business model, ability to innovate, research capabilities, patent ownership, operational excellence or superior distribution capabilities, to name a few. The harder it is for competitors to breach the company’s moat, the stronger the competitive advantage.
How good is the management team? A company is only as good as its leaders’ ability to plot a course and steer the enterprise. You can find out a lot about management by reading their words in the transcripts of company conference calls and annual reports. Also research the company’s board of directors, the people representing shareholders in the boardroom. Be wary of boards comprised mainly of company insiders. You want to see a healthy number of independent thinkers who can objectively assess management’s actions.
What could go wrong ? We’re not talking about developments that might affect the company’s stock price in the short-term, but fundamental changes that affect a business’s ability to grow over many years. Identify potential red flags using “what if” scenarios: An important patent expires; the CEO’s successor starts taking the business in a different direction; a viable competitor emerges; new technology usurps the company’s product or service.
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4. Put your stock research into context
As you can see, there are endless metrics and ratios investors can use to assess a company’s general financial health and calculate the intrinsic value of its stock. But looking solely at a company's revenue or income from a single year or the management team's most recent decisions paints an incomplete picture.
Before you buy any stock, you want to build a well-informed narrative about the company and what factors make it worthy of a long-term partnership. And to do that, context is key.
For long-term context, pull back the lens of your research to look at historical data. This will give you insight into the company's resilience during tough times, reactions to challenges, and ability to improve its performance and deliver shareholder value over time.
Then look at how the company fits into the big picture by comparing the numbers and key ratios above to industry averages and other companies in the same or similar business. Many brokers offer research tools on their websites. The easiest way to make these comparisons is by using your broker's educational tools, such as a stock screener. (Learn how to use a stock screener .) There are also several free stock screeners available online.
The bottom line on how to research stocks
Stock research is just a matter of gathering the right materials from the right websites, looking at some key numbers (quantitative stock research), asking some important questions (qualitative stock research) and looking at how a company compares to its industry peers — as well as how it compares to itself in years past.
Following these four steps can help you gain a deeper understanding of how to research stocks.
Colloquially, yes — "due diligence" or "DD" is a synonym for stock research.
Some professional investors, such as financial advisors, have a duty to act in their clients' best interest and are legally required take care, or exercise "due diligence," to not harm them financially — for example, by thoroughly researching an investment before buying it on behalf of a client.
Paid subscriptions and tools may streamline the research process, and may have more obscure types of stock data that aren't easy to find for free. But all of the types of data we've discussed in this article, such as SEC filings and valuation metrics, are available for free on websites such as EDGAR and Yahoo Finance .
Some professional investors, such as
financial advisors,
have a duty to act in their clients' best interest and are legally required take care, or exercise "due diligence," to not harm them financially — for example, by thoroughly researching an investment before buying it on behalf of a client.
Paid subscriptions and tools may streamline the research process, and may have more obscure types of stock data that aren't easy to find for free. But all of the types of data we've discussed in this article, such as SEC filings and valuation metrics, are available for free on websites such as
Yahoo Finance
More reading for active investors
Stock Market Outlook
Short Selling: 5 Steps to Shorting a Stock
» Who offers the best research? View our list of the best online brokers for beginners .
On a similar note...
Find a better broker
View NerdWallet's picks for the best brokers.
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The Ultimate Guide for Writing Assignments on Stock Valuation
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The Importance of Stock Valuation
Key factors influencing stock valuation, common stock valuation methods, research and data collection, defining the assignment objective, choosing the valuation method, introduction, methodology and analysis, conclusion and recommendation, finalizing your assignment, understanding stock valuation.
It is essential to gain a thorough understanding of stock valuation before starting the assignment writing process. The fundamental ideas and principles of stock valuation will be covered in detail in this section. Understanding the fundamentals of stock valuation will help you understand the importance of figuring out a stock's true value. Making wise investment decisions and determining the financial health and potential growth of a company requires a thorough understanding of stock valuation. You will discover how to evaluate financial information and interpret it to arrive at an accurate estimation of a stock's value through the exploration of various valuation methods and techniques. This section aims to give you the fundamental information required to explore the nuances of stock valuation and use it successfully in your assignment.
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When making investment decisions, stock valuation is of utmost importance. Investors can find stocks that may be undervalued or overvalued in the market by using it as a strong foundation. Investors can learn important information about a company's financial situation, future growth prospects, and general market positioning by using a variety of valuation techniques. Investors can maximize their potential returns and make well-informed decisions by using the stock valuation process. It enables them to evaluate a stock's intrinsic value and contrast it with its market price, allowing them to base decisions on a stock's actual value as opposed to speculative ones. Investors can better navigate the financial markets and improve their chances of making profitable investments by understanding the significance of stock valuation.
The valuation of stocks is significantly influenced by several factors. To ensure accurate stock valuation and make wise investment decisions, it is essential to take these factors into account. The performance and prospects of an industry can affect a company's valuation, so industry trends are among the important variables. The stock price is greatly influenced by financial performance, including revenue growth, profitability, and debt levels. The market share and competitive advantages of a company, as well as the competitive environment, should be considered. Stock valuations can also be impacted by macroeconomic factors like interest rates, inflation, and geopolitical factors. Finally, perceptions of a stock's value can be influenced by investor sentiment, market expectations, and psychological factors. For carrying out accurate and thorough analyses, it is essential to comprehend these factors and how they affect stock valuation.
Different techniques are frequently used in the world of stock valuation, and each has advantages and restrictions of its own. The discounted cash flow (DCF) analysis, the price-to-earnings (P/E) ratio method, and the dividend discount model (DDM) are three widely used approaches that are introduced in this section. The DCF analysis gives a comprehensive picture of a company's valuation by estimating the present value of anticipated future cash flows. Investors can assess a company's relative value about its earnings by comparing its stock price to its earnings per share using the P/E ratio method. Based on the present value of anticipated future dividends, the DDM determines a stock's intrinsic value. Investors who understand these techniques have a variety of tools at their disposal to assess stocks based on various financial factors. Understanding the subtleties of these approaches will help you select the one that will work best for your assignment and ensure a thorough and accurate analysis of stock valuation.
Writing an Assignment on Stock Valuation
This section will walk you through writing an assignment on stock valuation once you have a firm grasp of the subject. It will give you a step-by-step process to ensure an efficient and properly organized stock valuation assignment. By following this manual, you will be given the tools you need to conduct in-depth research, pick suitable valuation techniques, and communicate your analysis clearly and coherently. You can stay organized and focused by using a step-by-step process to make sure your assignment covers all the crucial facets of stock valuation. This section will offer helpful insights and pointers to help you write an engaging assignment, whether you are assessing a stock's current value, projecting its future worth, or comparing it to competitors in the industry. You can create a thorough assignment that showcases your knowledge of stock valuation and demonstrates your analytical abilities by using this methodical approach.
All well-written assignments are built on a solid foundation of research and data gathering. Start by compiling pertinent information about the business you are studying. To learn more about the financial performance of the business, this entails obtaining financial statements like income statements, balance sheets, and cash flow statements. Additionally, research market trends and industry reports to comprehend the company's operating environment on a larger scale. Keep abreast of recent news stories that might affect the company's valuation. Make sure the information you gather is trustworthy, accurate, and current. You will have a strong foundation for your analysis and be able to present well-supported arguments and findings in your assignment by conducting thorough research and data collection.
To keep your focus and organize your analysis effectively, it is crucial to define the assignment's goal clearly. Establish the precise goal of your assignment. Are you assessing the stock's current value, predicting its future value, or contrasting it with other companies in the same industry? You can align your analysis with the assignment's objective and make sure you address the key requirements by knowing what it is. Your research and analysis will be guided by a clearly stated assignment objective, enabling you to present a cogent and well-organized argument in your assignment.
Make a careful choice of the best stock valuation method based on the assignment's stated goal. Consider the benefits and drawbacks of each approach, then determine whether it is compatible with the demands of your assignment. The methods of valuation can include discounted cash flow analysis (DCF), price-to-earnings ratio method, market multiples, or other widely used approaches. Explain in your assignment why the method you've chosen is suitable for the particular valuation task at hand. Justify your choice. You can show that you have a thorough understanding of the valuation process and the logic behind your approach by making an informed decision and defending it.
Assignment Structure and Format
Your ability to effectively communicate your ideas depends on the organization of your assignment. You will find tips on how to format your assignment properly and organize it in this section. The right organization makes sure that your ideas flow logically and makes it simple for readers to understand your analysis. You can make an assignment that is simple to navigate and understand by adhering to the provided instructions. The section will also stress how important it is to maintain a professional format, which includes elements like distinct headings, subheadings, and a consistent writing style. Formatting with care will improve your assignment's overall readability and professionalism. This section aims to give you the skills and knowledge you need to structure your assignment effectively so that you can communicate your ideas in a clear, succinct, and structured way.
Your assignment's introduction is essential for drawing the reader in and establishing the context for your analysis. Start by making an interesting introduction that emphasizes the importance of stock valuation. To give context for your analysis, give a brief overview of the business and sector you are analyzing. Outline your assignment's goals and objectives in clear terms, stating the purpose and parameters of your valuation analysis. You will lay a strong foundation for the remainder of your assignment by establishing the tone and context in the introduction, piquing the reader's interest, and making sure they understand the significance of the subject at hand.
Describe the methodology you used for your stock valuation analysis in this section. Describe the fundamental ideas, calculations, and calculations used in the chosen valuation method. Explain in detail, step-by-step, how you used the methodology to examine the financial data of the company and arrive at a valuation. To support your analysis, make use of pertinent financial ratios, models, and formulas. Interpret the findings of your analysis by highlighting the most important trends and insights you found. Make sure to organize and logically present your findings so that the reader can follow your analysis and comprehend the thinking behind your conclusions.
Summarise the key findings and conclusions drawn from your stock valuation analysis in the assignment's conclusion section. Give a succinct summary of the major conclusions and patterns that your analysis revealed. Make well-reasoned recommendations regarding the stock's valuation and possible investment opportunities in light of your findings. Provide logical reasoning and evidence from your analysis to support your recommendations. Highlight the company's valuation's positives and negatives, and talk about any risks or uncertainties that might have an impact on the company's performance in the future. You can show that you have a thorough understanding of the valuation process and offer insightful advice to potential investors or stakeholders by making concise, well-thought-out recommendations.
It is essential to focus on improving and reworking your assignment as you get closer to finishing it. This section emphasizes the value of meticulous editing and proofreading to remove mistakes, maintain consistency, and enhance language clarity. To ensure a polished final product, pay close attention to grammar, punctuation, and sentence structure. This section also emphasizes the importance of proper formatting, which includes using the right headings and subheadings, constant font styles, and margins. Additionally, it emphasizes the significance of properly citing your sources in a bibliography or references section to show that you adhere to academic standards. You can add the finishing touches to your assignment by following the instructions in this section, making sure it is free of errors, correctly formatted, and demonstrates your dedication to producing high-quality work.
In conclusion, a systematic approach and a thorough understanding of the subject are required for writing an assignment on stock valuation successfully. By following the step-by-step instructions provided in this manual, you will be able to create a well-structured and comprehensive assignment. To effectively present your analysis, you must conduct in-depth research, carefully choose an appropriate valuation method, and present your findings. You can excel at stock valuation assignments and lay the foundation for a successful career in finance with practice, commitment, and attention to detail. You will be able to provide insightful and thoroughly researched stock value evaluations by putting the knowledge and skills you have learned from this guide into practice. To further improve your proficiency in stock valuation, keep in mind that you should constantly improve your abilities and keep up with the most recent market trends. You can develop the skills necessary to become an expert analyst who can contribute to the financial success of companies by being persistent and determined.
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17 Stock Market Worksheets PDFs (Plus Stock Market Lessons)
By: Author Amanda L. Grossman
Posted on Last updated: May 8, 2024
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Use these 17 stock market worksheet PDFs (and stock market lesson PDFs) to engage your students, kids, and teens.
Teaching students about investing, and looking for some killer stock market worksheet PDFs (that also happen to be free)?
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I’ve got you covered.
You don’t have to be a stock market wizard to teach your students, thanks to some great stock market lesson pdfs, lesson plans, and worksheets.
Psst: one of the best ways to teach students about investing and the stock market is to actually have them play it. But don’t worry – they needn’t lose any money. Here are 6 free stock market game for students , and 9 investing board games for kids .
Stock Market Worksheet PDFs
Teaching kids about stocks and how to invest is such a worthy cause – it’s one of the best ways to ensure they’ll have a solid financial future.
I can clearly remember learning (or, at least trying to learn) how to read stock tables in my seminar class back in middle school. We each chose a stock, and then read the stock tables on it from week to week over a series of a few months.
At first, reading a stock table is like trying to read hieroglyphics at a museum – it just isn’t intuitive.
But then as we worked through it together, it became less intimidating. Do the same with your own students! They’ll thank you when they’re older.
And you don’t have to do it alone (especially if you’re not confident with investing, yourself).
Whether you’re looking for worksheets to follow specific stocks on the stock market, or company valuation worksheets, or price-to-earning ratio worksheets – you’ll find them below.
1. One-Page Stock-Monitoring Worksheet
Suggested Age: 4-8 grade
Sometimes, simple is best, right?
Here’s a stock monitoring worksheet you can download for free.
It’s a way for your students to choose a stock to buy with $XXX amount of cash, and then to monitor that stock over several weeks.
Other one-page stock market worksheets include:
- Stock Market Research : Suggested Age Range: 7-12 grade
- Stock Market Tracker : Suggested Age Range: 7-12 grade
To go along with this, you’ll likely want to give your students a worksheet on how to read a stock table. I’ve got that coming up, next!
2. Playing an Investment Game
Suggested Age Range: 9-12 grade
The Consumer Financial Protection Bureau came up with this new stock market worksheet where kids work through why they think a company's stocks rose or fell.
This is great, critical thinking they can definitely use when they invest in real life!
Psst: want your child to start buying real stocks? Here are 7 stock apps for kids . And here's a Global Stock Pitch Competition .
3. Stock Investing 101 Worksheet
Suggested Age Range: 7-12 grade
This is a free Microsoft Word document that walks your students through three familiar companies on the stock market: Amazon, Home Depot, and General Motors.
![stock analysis assignment screenshot of stock market investing 101 worksheet for kids](https://www.moneyprodigy.com/wp-content/uploads/2020/05/stock-market-worksheet-pdf.png)
They’re asked to fill in a bunch of info for each one, then more thinking questions like which stock is the most volatile, and which stock is the most profitable.
4. Stock Market Definitions and Terms
Looking for NYSE terms + an answer key? Great!
This stock market vocabulary worksheet is very simple and straightforward and will help you reinforce a lesson on understanding how to maneuver the stock exchange (links to the worksheets are all the way at the bottom).
Psst: don’t forget to download the answer key – that has all the definitions on it.
5. Price to Earnings Ratio Worksheet
Suggested Age Range: Not given.
A great lesson to teach your students is how to value a stock. You can do this by helping them to figure out the price to earnings using this worksheet.
6. Buy, Sell or Hold?: An Overview of Investing
Practical Money Skills offers both a teacher’s guide and student worksheets talking about what the stock market is, plus has them work through the price-to-earnings ratio for real-life stocks. This is Lesson #21, FYI.
7. What’s Up with the Stock Market?
BizKids has a great video plus accompanying stock market worksheet PDFs that teach your child to think about investment strategies. Students will also learn how to read a stock ticker.
8. Dividend-Paying Stocks (PDF)
Suggested Age Range: Teens
Here’s a great, free teaching guide + worksheets on dividend-paying stocks.
Psst: you'll want to check out these fun compound interest activities for kids , too.
9. Doing Your Corporate Homework
Suggested Age Range: not given.
Either assign a corporation to each student or let them choose one. Then, have them do research on the company by using this worksheet.
Afterward, ask them if they should buy that company’s stock or not.
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10. Are Stocks a Risky Long-Term Investment?
Suggested Age Range: 7-12 grades
Your students will analyze stock market returns from 1871 to 2014, and then answer questions to determine whether or not it’s a good idea to invest in stocks over the long term.
Psst: you’ll want to check out my article on 7 best investment books for kids and teens .
Stock Market Lessons PDFs
Looking for more than just a one-page stock market worksheet?
I’ve got exciting stock market lesson PDFs, PowerPoint presentations, and anything else you need to teach your students all about the stock market.
1. Building Your Future: Accumulating Wealth
Suggested Age Range: High school
Are you ready for a really comprehensive set of stock market worksheets and lessons for students?
This is it!
You’ll definitely want to download and read the 22-page Teacher’s Guide that goes along with it.
![stock analysis assignment screenshot of teacher and student guide on stock market with worksheets](https://www.moneyprodigy.com/wp-content/uploads/2020/05/stock-market-lesson-pdf-free.png)
Investing subjects covered (with 39 pages of stock market worksheets) include:
- Overview of investing
- Asset allocation
- Evaluating stocks
- Building a bond portfolio
- Mutual funds
2. Stock Market Price History Activity
Suggested Age: 9-12 grades
This is a great, in-depth lesson on how real and nominal prices work, inflation, and more by tracking a stock of their choosing over 30 years.
3. EconEdLink’s Where Did All the Money Go?
Suggested Age Range: 9-12 grades
I like how this lesson on the Great Depression gives students clues and has them solve the mystery of what caused the Great Depression.
Great lesson on how interdependent everything is – including the stock market, jobs, banks, farmers, etc.
4. Money Working for You Stock Market Lesson Plan
Register with High School Financial Planning, and check out Module 4 on investing, which is an entire lesson plan around investing.
You’ll get the following, all free:
- Instructor lesson packs
- Student lesson packs
- Lesson slide decks
There you have it – some awesome, and free stock market worksheet PDFs for students (both kids and teens) that will help them understand the stock market. Much better than I did at their age, anyway!
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What is Stock Analysis?
Types of stock analysis, more resources, stock analysis.
A method that an investor or trader uses to evaluate and investigate an investment or the stock market
Stock analysis refers to the method that an investor or trader uses to evaluate and investigate a particular trading instrument, investment sector, or the stock market as a whole. Stock analysis is also called equity analysis or market analysis. Investors or traders make buying or selling decisions based on stock analysis information.
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Stock analysis helps traders to gain an insight into the economy, stock market, or securities . It involves studying the past and present market data and creating a methodology to choose appropriate stocks for trading. Stock analysis also includes the identification of ways of entry into and exit from the investments.
- Stock analysis is a process followed by traders to evaluate and understand the value of a security or the stock market.
- Stock analysis follows the idea that analysts can create methodologies to select stocks by studying past and present data.
- Fundamental analysis and technical analysis are two broad types of stock analysis.
Stock analysis can be grouped into two broad categories:
1. Fundamental Analysis
The fundamental stock analysis method involves the evaluation of a business at a basic financial level. Investors use fundamental analysis to determine whether the current price of a company’s stock reflects the future value of the company.
Fundamental analysis uses different factors such as the current economic environment and finances of the company to estimate its stock value. Different key ratios are also used to determine the financial health and understand the true value of a company’s stock.
- Earnings per share (EPS) – The EPS is useful when companies operating in the same industry need to be compared. A company’s EPS indicates its profitability; hence, traders consider an increasing EPS a good sign. The higher the value of EPS, the more the company shares are worth buying.
- Price to Earnings ratio (P/E) – The P/E ratio indicates how much investors are willing to pay for the earnings of a company. A higher P/E value could mean an overvalued stock. Or, it could imply that the market is expecting the company to perform extremely well over time. On the other hand, a low P/E value is seen as unfavorable by the market.
- Price to Earnings to Growth ratio (PEG) – The PEG ratio helps to determine the value of a company’s stock while considering the earnings growth of the company. The PEG ratio, along with the P/E ratio, can help obtain a clearer picture of a company’s stock than the P/E value alone.
- Price to Book ratio (P/B) – The P/B ratio is used to compare the market value of a company with its book value. It seeks the value that the stock market places on a company’s stock relative to the book value of the company. A company with sound financial health will trade for more than its book value since investors will consider the company’s future growth while pricing the stocks .
- Return on Equity (ROE) – It measures how effectively a company uses its assets for producing earnings. A high ROE implies that a company squeezes out greater profits with available assets. Hence, with all other things equal, it will be better to invest in high ROE companies in the long run.
- Dividend Payout Ratio – It measures the percentage of the company’s earnings paid to shareholders or owners. The earnings of the company, which are not passed on to the shareholders, are used to pay off debts, reinvest in business operations, or are retained for future use
2. Technical Analysis
The technical analysis method involves examining data generated through market activities, such as volume and prices. Analysts following such a type of stock analysis use technical indicators and tools like charts and oscillators to identify patterns that can indicate future price trends or direction.
Technical analysts examine the historical trading data of a security and estimate the future move of the security. It is frequently used for forex and commodities. The technical analysis is based on the following assumptions:
- The market knows it all. Technical analysis assumes that the market price of a stock reflects all that has or can affect a company. Technical analysts consider that all the factors affecting the company are priced into the security.
- Price follows a trend. It implies that once a trend is established, future prices tend to follow the direction of the trend. Such an assumption is the basis of many strategies for technical trading.
- History is likely to be repeated. History repeats itself, mainly concerning price movement. Market psychology causes price movements to repeat. Technical analysis involves using chart patterns to analyze the movements in the market and study trends. Charts that have been used for over 100 years are still relevant since price movement patterns are often repetitive.
Thank you for reading CFI’s guide on Stock Analysis. To keep advancing your career, the additional resources below will be useful:
- Earnings Per Share (EPS)
- Price Earnings Ratio
- Normalized EPS
- Return on Equity (ROE)
- See all capital markets resources
- See all wealth management resources
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How to Analyze a Stock
Buying stocks can feel like gambling if you don't understand how to analyze a company and assess its growth potential. Fortunately, you can use several reliable ways to predict investment potential more accurately. If you're new to investing, you might hear other investors debating the relative merits of technical or fundamental analysis.
By using various analysis methods, you can find stock trading opportunities and position your portfolio for future growth. Read on for how to analyze a stock.
What is Stock Analysis?
Best ways to analyze stocks, technical analysis.
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Stock analysis involves either technical or fundamental analysis. Generally, technical analysis focuses on short-term price fluctuations and is used by day traders trying to beat the market. Technical analysis aims to forecast the direction of prices by studying past market data, primarily price and volume.
Fundamental analysis is intended to find long-term investment opportunities. Fundamental analysis examines the underlying company, its products, management, debt and cash flow. Focusing on great businesses trading at fair prices, fundamental analysis can help you select long-term growth opportunities.
While fundamental analysis offers the best options for long-term investment analysis, it's worth understanding all your options. Here are the four most common methods of analyzing stocks.
To evaluate investments and identify trading opportunities, technical analysis looks at statistical trends gathered from trading activity, such as price movement and volume. The idea behind technical analysis is that stock charts present all the information needed to analyze history and trends. Technical analysis requires in-depth market understanding and the ability to read trading charts.
Technical analysis may look at:
- Historical movement and price trends
- Price movement trends
- Market patterns
- Price movement
What doesn't technical analysis include? It doesn't evaluate a company's intrinsic value. That means that if a company shows a strong possibility of growth based on historical trends, even if its products are obsolete or its management is weak, it might be a good pick from the perspective of technical analysis.
Technical analysis attempts to predict whether stocks will go up or down with trend tools. Common trend tools include linear regression, parabolic SAR, MACD and moving averages. Technical analysis also looks at leading indicators and lagging indicators.
But even with excellent tools, technical analysis can produce false signals. It also requires greater tools and extensive market understanding to use effectively.
Qualitative Analysis
Qualitative analysis looks at the quality or strengths of the company. Common qualitative considerations are the company's leadership, product and industry. In many ways, qualitative analysis is the opposite of technical analysis. You're assessing whether it's a good business, a good product and a growing industry.
Qualitative metrics to consider include:
- Business offerings: Does the company's business model address the needs of its target market? Are its products, services and brand identity in tune with current market demands, and is it showing innovation for future growth? Who are the company's target customers?
- Industry placement: Does the company have a competitive edge or existing market share that can drive further success? Does it have a patented process or product that protects it from competition?
- Company leadership: What credentials and past experience do the top executives and leadership bring to the team? Do they have a proven track record of success in similar environments?
- Future growth: Is the company's industry recession-proof? Is it a new or growing industry? Does the industry have strong long-term demand and growth?
Quantitative Analysis
Quantitative analysis is similar to technical analysis in that it uses data and numbers to predict future price movements. With quantitative analysis, investors focus on the company's revenues, price-to-earnings ratio and earnings-per-share ratio. Institutional investors may also use statistical modeling and mathematical techniques to predict a stock’s value.
Quantitative analysis offers an objective starting point for stock analysis. While it can help to identify patterns or risks, it requires expertise to shift through data and understand patterns. However, combined with qualitative and fundamental analysis, it can offer a comprehensive look at a stock's potential.
Fundamental Analysis
Fundamental analysis is the most popular method for investors focused on long-term growth opportunities. With fundamental analysis, you'll use valuation metrics and other information to determine whether a stock is competitively priced. Fundamental analysis is built on the idea that a stock price doesn't necessarily reflect the intrinsic value of the underlying business.
By using fundamental analysis tools such as earnings per share or debt to EBITDA, you'll get a sense of the company's long-term earning potential and more effectively locate investment opportunities. In reality, qualitative and quantitative analysis are elements of fundamental analysis. Here's an overview of the metrics to consider in fundamental analysis.
Earnings Per Share (EPS)
Earnings per share (EPS) gives an indication of how profitable a company is by correlating the company's profit to each share of stock. Companies generally report EPS quarterly. EPS is calculated by dividing the company's net income minus dividends by the number of outstanding shares.
A high EPS is a good sign; an EPS trending upward over time shows a company that is growing. A negative EPS over time can indicate a stock is a poor choice. Companies can inflate EPS by cutting expenses or selling an asset, so looking at trends over time is important.
Price-to-Earnings (P/E) Ratio
A stock's P/E ratio compares its current price to its earnings per share. A lower P/E is a good sign of financial strength. With the P/E ratio, you can compare different stocks with each other or with a benchmark like the S&P 500 Index to understand the company's performance relative to the overall market. P/E doesn't factor in growth, so it should be used with other metrics.
Price-Earnings-Growth (PEG) Ratio
A PEG ratio is used to predict a company's future performance. Investors can look at PEG for different historical periods to make an informed guess about future trends.
To calculate PEG, divide a stock’s P/E by its projected 12-month forward revenue growth rate. Investors usually look for a PEG lower than 1. A PEG higher than 2 indicates a stock that may be overpriced.
Price-to-Sales Ratio (P/S)
A P/S ratio compares stock price to a company's revenue. To calculate P/S, you'll divide the stock price by company revenues. You can use the P/S ratio to compare competing companies. A low P/S ratio indicates a potentially advantageous stock opportunity.
Price-to-Book Ratio (P/B)
The price-to-book ratio (P/B) compares a company’s book value to its current stock market value. You can use the P/B to identify companies that are undervalued. Generally, these companies have significant growth, but their stock prices remain low compared to that growth.
To calculate the P/B ratio, you'll divide the market price of a stock by the company’s book value of equity. To get the company's book value, subtract its total liabilities from its assets.
Debt-to-Equity Ratio
A company's debt-to-equity ratio gives a picture of its debt and its ability to repay it. It's not a good sign if a company goes into more and more debt to continue growing and cannot pay it back.
Divide a company’s total liabilities (debt) by its shareholder equity to calculate the debt-to-equity ratio. A debt-to-equity ratio under 0.1 is considered good, while a ratio higher than 0.5 can be a bad sign about the company's debt management and future potential.
Debt-to-EBITDA
A company's debt-to-EBITDA is a simple way to access a stock's potential. EBITDA stands for earnings before interest, taxes, depreciation and amortization. You can find it on a company's income statement.
Divide the company's total debt by EBITDA to get a ratio. A high debt-to-EBITDA ratio could signify a higher-risk investment. This is especially true during recessions and other volatile financial times.
A company's revenue indicates the financial viability of a company. A company with strong or increasing revenue indicates that the company is growing and expanding. Tracking changes in revenue over time can help identify companies with consistent growth.
Certain large companies, especially tech companies, may show growing revenue with a negative EPS because they are reinvesting profits into the company. In that case, they can still be a strong stock choice despite showing low profits.
Dividend Yield
Dividend yield, or the amount a company pays in dividends, can indicate a company's financial strength. This assessment factor doesn't work for all stocks, as many companies don't pay dividends. However, large established companies sometimes pay their shareholders a portion of their earnings rather than reinvesting into their business.
You can earn small, consistent returns with quarterly or annual dividend payments. You can calculate dividend yield by dividing the company's annual dividend payment by its share price. The average dividend yield for S&P 500 companies is around 2%, but some real estate investment trusts (REITs) or exchange-traded funds (ETFs) may pay 5% or more. Keep in mind that companies can change their dividend payments at any time, so dividend yield is not guaranteed.
Company Reports and Projections
Companies release quarterly or annual reports. These reports can give investors a sense of the company's management. The reports often include projections for upcoming revenue and EPS, as well as the company's earnings report and balance sheet. Watch the effect of these reports on stock prices, as other shareholders and investors may buy or sell stock based on the news in the report.
Advantages and Limitations of Stock Analysis
There are pros and cons to any stock analysis. However, without a consistent, proven strategy, analyzing stocks can be difficult. And nothing is guaranteed in the stock market. Here are some of the pros and cons of stock analysis.
Stock analysis allows you to create a reasonable assessment of a company's potential and a particular stock's investment opportunity. You may be able to identify and purchase under-valued stocks from exceptional companies and benefit from faster portfolio growth.
Limitations
While stock analysis is essential, it is far from a precise science. Even a company with excellent leadership and a solid product may struggle.
For that reason, diversifying your portfolio across many stocks, bonds, ETFs, index funds, REITs and other investment classes can protect investors from the poor performance of an individual stock.
Building Financial Growth
As with anything else, practicing the strategies to analyze a stock can build proficiency over time. You'll gain confidence in the various metrics of fundamental analysis and the skills to recognize companies with investment potential. It's worth practicing because creating a strong, diversified investment portfolio can create long-term financial growth. Learn more about how to build a stock portfolio here .
Frequently Asked Questions
What pe ratio is good.
The average PE ratio ranges from 20 to 25. A PE ratio below 20 would be considered a good price-to-earnings ratio. A PE above 25 is less than ideal.
How often should you look at your stocks?
How often you should look at your stocks depends on your investment strategy and time horizon. Some experts suggest checking your portfolio quarterly to avoid emotional reactions to daily price fluctuations but that varies for individual investors.
What is the best way to analyze a stock?
Combining various fundamental analysis strategies is often the best way to analyze stocks. You can consider the P/E ratio, debt-to-equity ratio, earnings per share, and more.
About Alison Plaut
Alison Plaut is a personal finance and investing writer with a sustainable MBA, passionate about helping people learn more about sustainable investing and long-term wealth building for financial freedom. She has more than 17 years of writing experience, focused on investments, business, personal finance, and real estate. Her work has been published in The Motley Fool, MoneyLion, and regularly appears on Benzinga.
Everything You Need To Know About How To Analyze An Individual Stock
![stock analysis assignment Cody Willard profile picture](https://static2.seekingalpha.com/images/users_profile/047/578/882/small_pic.png)
- Here's a complete transcript from a seminar I did explaining everything I do when I analyze an individual stock.
- I also walk through detailed examinations and fundamentals for four individual stocks.
- Valuations matter, even though my approach to "valuation" is quite different than most analysts.
- I also outline what I think will be the next trillion-dollar revolution to get in front of.
Yesterday, I did a Zoom video where I showed people the approach I take to valuing individual stocks, including what resources I use and much more information about stock analysis.
You can watch a replay of the video here and I’ve included a full, lightly edited transcript below.
![stock analysis assignment stock analysis assignment](https://static.seekingalpha.com/uploads/2021/1/28/saupload_Screen-Shot-2021-01-28-at-1.35.58-PM_thumb1.png)
Cody: So, I have no written notes, no nothing. I’m going to show you guys. We’re going to pick three or four stocks, analyze them and then I’ll take questions along the way.
Guest: Cody, how you doing? I saw you play at New Mexico. I was a scout for the Heat.
Cody: Okay, you’re David, yeah we talked. It’s good to see you face to face. You look like you could be a basketball player kind of.
Cody: I don’t play anymore. I sometimes help myself go to sleep by picturing playing like I used to growing up. One of the most influential books I ever read was John McEnroe’s Visual Imagery. I was probably 12 years old or something and I was a good athlete. I was the fastest kid in my town. But, I read that book and he talked about that if you want to be able to do all these amazing plays and things that he does or whatever your sport might be, you need to picture your body doing it. You need to picture you actually dunking the basketball and doing 360 dunks. And to this day I think that’s important. I picture how am I going to make money? How am I going to grow my career? And I picture going to work, trading, investing and making money. And I think it’s always good to picture what it is you want and then take the steps that you can as much as possible to attain it. I would note by the way, I had a 43 inch vertical jump, as David you can attest.
Guest: It’s unbelievable.
Cody: I truly believed, to this day, I truly believed I probably would have jumped high because I was a good athlete. But that extra six or 10 inches that I got from Visual Imagery was the difference in getting me to a division one basketball.
Guest: Yeah that’s a top of the range there. But I went to Wichita State and they said the crowd, the arena unbelievable. Then we went to play New Mexico, this was insane. And I couldn’t believe it. The crowd, the noise. I mean that’s one of the nicest arenas in the nation, still to this day.
Cody: I don’t know. It still is pretty cool. But, it was so unique and you know of course the ’84 Finals were held there. Guys let’s get back to stocks. Appreciate you being here David good to see you.
Cody: All right. All right, let’s hit in. You guys wanted a few minutes on let me pin me to the top here. All right, let me do a welcome. Hey, welcome everybody to the Trading with Cody very special edition, very special Brady episode of live Q&A chat. We do this most every week. A lot of times it’s actually just in a chatroom. Occasionally once a month, maybe once every couple of months. We do a video chat where we engage with each other and I thought, I’m always getting these questions about how do you analyze a stock? How do I find what the growth rates are and what the enterprise value is or whether it’s expensive? And I just thought we’d go through and I would do, I’ll analyze a few stocks with you guys here with me and we’ll see what we can learn. And ask questions along the way. If something is confusing, there are such things as dumb questions. So please don’t ask a really dumb question. But I don’t mind elemental questions. If you are confused on just a fundamental concept of what I’m discussing please do ask, because others probably are too.
Cody: So, maybe there aren’t any dumb questions. Maybe that saying is actually accurate. Actually, here’s and the lyrics of a song my good friend Moses and I wrote together for the band The Muddy Souls many years ago. In it, it talks about don’t ever ask Cody something you can google. So don’t ask me something you can google. But if I can teach you something, ask away.
Cody: Someone wanted me to talk about the markets first and foremost. Look, it was an ugly morning clearly. Semiconductors in particular are down 4%. S&P is down about 2%. If you’re not in a stock that is heavily shorted, it’s probably down today. And if you’re in a stock that’s heavily shorted, it’s probably up somewhere between 30% to 150% today. And we’ve been talking for a while about that I think we’re somewhere in this blow off top phase of a long term bubble blowing bull market that I’ve been writing about and talking about for a decade, 11 years now. And we’re trying to blow off this top somewhere and we don’t know whether the blow off top takes weeks or months, but it’s probably not years.
Cody: I’m clearly not wildly bullish. I think there’s a lot of froth in this market, but that doesn’t mean it’s not going to get even frothier as today evidences, proves in somewhat with those many small-cap and, or large-cap heavily shorted stocks tripling this week or up to 50% or 150% today. I mean you can just run through a litany of them. I bet you could do a list of the most heavily shorted stocks on Wall Street and that list is up 8% today, while the rest of the market’s down two to 4%. That’s not necessarily helping. I think you got to be careful out there. You’ve got to be patient. Don’t be greedy. If you’ve got names like Jumia ( JMIA ) that we have or Virgin Galactic ( SPCE ) that we’ve had since ’07. Jumia since ’15. I’m riding those. I’m not selling out of them. I think it’s good to hedge a little bit in it. I think you can maybe sell some long dated calls way out of the money if you’re a hedge fund manager against some of those positions. If not, maybe you just trip a little bit of those. No reason SPCE needed to be at 59 this morning. Now it’s back at 51. Doesn’t need to be at 51 either. These are just numbers at this point.
Cody: One of the things that’s really annoying about the stock market right now is the step I’m about to teach you, is meaningless in this particular moment. Nobody cares about valuations. These are just numbers, just buy more. GameStop at eight, GameStop at 80, GameStop at 800. Just numbers. That’s not true by the way. The numbers matter at some point, just not necessarily right now. So I’m going to teach you stuff and I shouldn’t even use the word teach, because then I sound like I know a bunch of stuff. I’m going to teach you how I analyze stocks. I’m just going to show you what I do to analyze stocks, figure things out.
Cody: But at this particular moment, value investing is certainly dead right now on this date. But, it won’t always be and I’m not necessarily a value investor, right? I mean it’s clear, right? I’ve owned Apple ( AAPL ), Google ( GOOG ) ( GOOGL ), Facebook (FB), Bitcoin, Nvidia ( NVDA ), all these revolutionary names from a very long time most of them, Jumia and SPCE more recently. But, I try to find them when they are, I feel like, at reasonable valuations in the mindset that I look at. And so with that intro, let’s jump into the market. Let’s jump into analyzing some stocks. Number one, I think the most important thing that I start with is a top down view, okay ? I want to look at the world. I want to empathize with other sectors of the world, or other demographics, or just the general population, the seven or eight billion people who live on the planet earth. And try to get a grasp of where the major trends are headed.
Cody: So, I mean probably the best example I can come up with right off the top of my head is when I talked relentlessly about the smartphone revolution and what I called mostly the app revolution. From 2008 to 2011 that was my favorite theme. And the reason why the theme was my favorite was because it is such a revolutionary concept that suddenly people are going to be carrying around little computers that are connected to everybody else and connected to every bit of data and information and video that’s ever been recorded, is all right there in your pocket all the time. You’re going to do billions of people are going to do billions of transactions daily, trillions of transactions. They will be interacting with that platform.
Cody: So, to me people were talking at the time in 2009, 2010 worried is Apple going to sell 20 million smartphones or will it be 22 million smartphones last year. None of it matters, because you knew there were going to be billions sold in 10 years. And then you just had to get your bucket out in front, your investing bucket. You had to get some capital in front of those trends. And in order to do that safely, I want to find the companies that are leading the revolution and then I want to make sure that I’m paying mind to valuation and giving myself an entry point and, or an entry, not a point because I spread my purchases out over time. I don’t do it all at once, as subscribers all will tell you, I do an initial purchase and then I’ll put a little more in a week or two or in a day or two. Hopefully the price comes down as I’m trying to build up a position, because I trust my analysis. I trust my top down view and then I trust my valuation analysis of the stock that I’m going to pick.
Cody: So if the market is moving down, like for example it was with Tesla after I started buying it at what 50, a year and a half ago. And it went down to 40 and we bought it the whole way down and it was very painful at first. As again, subscribers can attest. But I trusted my analysis, I trusted the valuations, I trusted my top down thinking and Tesla ( TSLA ) knock on wood, has worked out quite well since then, probably because of those things. And something else we should mind, don’t ever confuse a bull market with genius. So, I got lucky too. So we all get lucky buying the right stuff. Well, I do think we can maximize our luck by doing some of this analysis.
Cody: So, right now far and away my favorite revolution out there, the most clear, the market that is most clearly going to be a multi-trillion dollar market five or 10 years from now is space. The space revolution, aerospace. Getting off of this planet and going into the galaxies, going into our solar system. Going to the moon, going to Mars, building stations, colonies on Mars and other places. These things are going to happen, going to start happening over the next five or 10 years and they will turn into multi-trillion dollar markets and I want to have my bucket out in front of them. So I spend a lot of time trying to figure out ways to get in front of the space revolution.
Cody: One of the first one, again as subscribers could tell you, is Virgin Galactic. And so let’s analyze it. I mean this is exactly what I did. Two years ago it was space, it’s happening. It’s finally here. You got SpaceX about to do this stuff. It’s like when Tesla was finally about to release the cheap 35,000 self driving car and that’s why I was like this market is happening. They’re revolutionizing the car. Get in front of it. space, it’s about to happen. The costs have come down. SpaceX is proving that. Who else is out there? We got to find space plays. So then I start googling space plays and at the time Virgin Galactic was still private. It was going to go through a SPAC and the SPAC was trading at $7.00. It was IPOA I believe was the symbol at the time when I bought it and we bought it somewhere around there, right guys?
Cody: And at the time I looked at the chart and the chart had done nothing for a year and a half because SPACs weren’t hot yet and no one knew this even existed and they didn’t know what Chamath, the guy who’s bringing this SPAC out, who brought that SPAC out, they didn’t know what he was going to acquire. So, they announced he was going to acquire Virgin Galactic and the stock went up to 12 and then it went to seven and we could have bought it at any time at that point. And here’s why we did. We started doing the analysis, okay top, down space revolution got to be in it. This is a leading company. Let’s go out, I live in New Mexico. I went out to the space port. I actually visited headquarters of Virgin Galactic. I get to know what’s going on around here, want to see the actual company. So I started top, down and now I’m going bottom up. Not bottoms up, but bottom, up and we’re going to analyze a company’s individual fundamentals and in order to do that you need to look at the founders, the company, the management, where they are. If you can go see them, great. If you can call them, great. If you can’t, you do what you can from your computer, keyboard warrior, investing warrior.
Cody: Virgin Galactic, like I said this is a heavily shorted stock. And like I mentioned a minute ago, if you’re in a heavily shorted stock, it’s probably up 20 to 150% today and Virgin Galactic would count. So, Virgin Galactic’s up, oh, I mean to show you my screens.
Cody: Share. Now are you seeing the screen?
Guest: Yep.
Cody: Great. So Virgin Galactic’s up 25% today and so when I started investing in the SPCE revolution I googled what companies could be coming public. What companies are public and I found SPCE. It was IPOA at the time. So I type in SPCE into google, SPCE. And you can look at it, do a little research. It’s good to just see, what are the top stories today? SpaceX is first private space group paying millions. Interesting. Everybody is talking about SPAC and the stock, yeah it’s not surprising. Now let’s go in and do a little fundamental analysis and I’m not joking, you can do all of this on Yahoo Finance. You don’t have to have a Bloomberg terminal. You don’t have to have subscriptions to anything. I’ve been doing it on Yahoo Finance for 20 years for free and I have a Bloomberg and I don’t have to do it on there. I learned, when I learned to do this stuff I was doing it on Yahoo for free. I mean I was broke. I was living in a rat-infested, rent-controlled apartment in Borough Park, Brooklyn when I started analyzing stocks and learning to do this stuff.
Cody: So, Yahoo Finance works, use it. If you’re familiar with Bloomberg, do it. But I’m going to just show you, look. Okay, so let’s go in here. 52 bucks a share, wow 26%. I hate buying a stock that’s up 26% in a day, but it was not at the time. So anyway, at the time you’re looking at and the valuation at $7.00 was one-seventh this. So it was about a billion and a half, two billion dollars when I started buying it as I recall. That’s one of the first things I look at, what’s the actual market cap of the company? What is the market valuing the equity in this company at? 12 billion right now, that’s not cheap like it was just at a glance. $12 billion is a lot of money for something that’s still a startup, I know that. So let’s go in and do a little SPCE. All right, so that’s where I start. I don’t even look at any of the rest of this stuff. I guess you can look at days range, 52-week range, get a sense. Even look at the chart maybe. Yep, yep interesting chart. We bought it right there. And we’ve ridden it and let’s go to financials.
Cody: Total revenue is one of the first things I looked at. Is the company generating serious revenue? No, no, no. Four million dollars people. This company is not generating any revenue. It’s worth 12 billion, it’s generating four million. Again this one is unique because it’s such a start up and it’s such a new revolutionary sector. Most companies you’re going to look at are not going to have no revenue, but this one does. So, I’m already like $12 billion market cap, four million dollars revenue. That's 3,000 times earnings or is it 300? No that’s 3,000 times revenue, starting at 3,000 times revenue. That’s not cheap. Clearly the market is expecting this company to do billions in revenue over the next few years. So, you have to take that with a grain of salt. So then the other thing I always like to look at is what the cost of revenue is, because then I can figure out gross margins. And a company that is incredibly profitable always has high gross margins, Apple being the one exception perhaps. Tesla over time could be too.
Cody: But this one’s not a good example again because this one doesn’t even really have a cost of revenue for last year. So there’s 100% gross margins, which is great. But more realistically their revenues, and you’re going to get a gross margin picture and that’s an important thing. A company that is over gross margins, gross margins that is over 50% I like. Gross margins that are below 30% I’m really going to have to like the company like I did with Tesla when its gross margins at the time were 15 to 20% when we were buying them a year and a half ago. Now they’ve gotten to say 25 or 30%. We’ll do Tesla next and do that. It’s a better example of what we’re doing. All right, let’s also hop over then, find out what the analysts are expecting. The analysts are expecting revenue to grow this next year from four million to, well they’re calling it 700,000. Let’s call it whatever it is three million, four million bucks. They’re expecting next year to grow to 27 million, which would be 3,500% growth.
Cody: So, yeah I mean clearly this thing’s about to turn on and it’s not on yet. So this is, again this is not your typical stock you’re going to analyze because most of them will have not these kinds of no revenue to huge revenue growth numbers. But this is a good example. We still need to learn to do this, so. A company is not profitable. Everybody’s expecting it to lose at least a $1.25 this year per share. Next year it might get a little more profitable. I’m not even sure those numbers are going to be right though because it could spend a lot of money ramping up, especially with the stock having gone to 55, the company could do a secondary right now, raise 500 million bucks and spend it over the next year or two and that would make these earnings decline because the company’s spending and to make the earnings, eventually that will more than make up for it, if it works.
Cody: So, this is a company that is trading at … The other thing I want to look at by the way. I always like to look at is the balance sheet. I just want to see if the company’s got a lot of cash and, or a lot of debt. So for cash just come in here, total current and its cash equivalence and that’s like treasuries and some things. And so, this company has already got, about half a billion dollars, 500 million bucks in cash sitting on the balance seat, sitting in a checking account essentially. And let’s go see we don’t want current liabilities. You want long-term debt and they’ve got $22 million. And so the debt is meaningless compared to the cash. They’ve got $500 million in cash and basically no debt which is fine, that’s great. That’s what you want. You want a company with no debt, especially these days. They should be earning a lot of money and putting it on the balance sheet or they need to be raising a lot of money and putting it on the balance sheet and that’s what this company has done, brilliant.
Cody: So great, they have half a billion dollars that they can invest already. I still think they should probably do a secondary right away, raise another half a billion. But a billion dollars in their balance sheet and have a billion dollars on the balance sheet and be ready to rock for the future. All right, I want to do that one. That’s Virgin Galactic, okay. So is it expensive? Yes, wildly expensive because it’s trading at 3,000 times revenues. But, it’s about to start turning on its revenue, so we got to take that for what it’s worth. Can this company earn billions of dollars in order to justify a $12 billion market cap? This is where it gets to be you’re not doing fundamental numbers anymore. Now you’re doing, now you’re talking about dots, analyzing concepts and markets, market places in your mind.
Cody: Let’s think it through. How many people are going to be able to afford hundreds of thousands of dollars for a space experience which is what the first year of revenue is going to be doing, is going to be generated from for Virgin Galactic. Not many, not many at all. So, again that’s not going to be the model. Over the long term , that’s clearly not what they’re going to be doing. So then you go in and you dig into Virgin Galactic. And this is what I’m born to do. Go to their website, just google it. Or it’s actually also on Yahoo Finance by the way. But, go to Virgin Galactic and look at their website. Oh, I need to get back on the share screen. Share screen, share. I’m going to hit refresh because I bet they’re launching, I bet this video launches. That’s over New Mexico. That is New Mexico people. It’s the only multi-billion company that I know of based in New Mexico, which is exciting for someone from New Mexico. There’s the space port. There’s the space port in New Mexico.
Cody: So let’s go. Look at the company, analyze it a little bit. What they do, vision, products, learn. Oh, they’re hiring, that’s always good to see. Companies that are hiring are probably growing. Who are we? Let’s learn, meet the team. Get to know the people who are doing it and in this case it’s a very famous Sir Richard Branson that’s the founder and leader of the team. He’s not even going to be on here. He’s the chairman I guess. But, then you want to look at these guys. They recently hired a new CEO I happen to know, a guy who’s more aligned with Disney ( DIS ) and entertainment stuff than engineering stuff, which is probably a good idea at this point. The company is going to start doing commercialization stuff.
Cody: So if you dig into it, what you’ll find out is that Virgin Galactic is not just going to be shipping people to the edge of space for hundreds of thousands of dollars long term . They’re going to be trying to figure out ways to do supersonic package shipments. They’re going to try to figure out how to get you from Florida to Abu Dhabi in an hour. And then who knows? It’s sort of like I used to talk about with the app revolution. For many years, I would say I don’t know all the incredible ideas that people are going to come up with to use on an app, on that smartphone platform. But they’re going to have wild and cool and cool, crazy stuff that you’ll be able to do that we haven’t thought of yet. And that’s the same thing with space. There’s going to be a lot of innovation that we don’t even realize yet. We don’t know all the ideas and revenue generation models for Virgin Galactic and as I start describing this, I get very comfortable that oh, my goodness these guys could do billions of dollars.
Cody: Now, it needs to somehow make billions of dollars, not just generate the sales. So when it was going for two billion dollars, the market cap when we were buying it at seven bucks again back in the day. I talked with subscribers a lot about why I felt like that was a good valuation. And it’s in large part because you could picture it as a venture capital thing. If you put some seed money in here in a few years, it could be worth even much more. And so it could be worth tens of billions of dollars because at two billion dollars it’s basically a four level for a company that’s already got some technology established and money and Richard Branson at the head.
Cody: Now it’s a $12 billion market cap, so it’s worth tens of billions. So part of that move’s done. It’s up 800%. Valuation is not that attractive now. Now you really for it to be a wonderful buying opportunity at 55 bucks, I want to feel like, “Hey I could be a 10 bagger.” For this to be a 10 bagger, now we’re talking about $100 billion or more valuation. That’s hard. That means the company’s going to need to generate tens of billions of dollars in revenue in the next five to 10 years. So, valuation matters. Valuation matters. This is why we go through this whole process. I probably shouldn’t have started with space now in retrospect because it is so unique. Let’s go do Tesla.
Cody: People ask me, “Is Tesla cheap Cody?” Let’s do it. I'm going to share my screen again. Share. Space Port New Mexico, Space Port USA in New Mexico that’s what it’s called. Okay, Tesla, I typed space because I was saying the word space. All right, Tesla you google Tesla same thing. You know it. I mean everybody knows Tesla these days. Back a year and a half, two years ago you probably knew it was Elon Musk, maybe. Now he’s the richest guy in the world, so everybody knows him. Elon having some fun today, as often he does talking trash to Wall Street. It has nothing to do with Tesla. Let’s go, let’s just do the hardcore fundamental analysis. That’s not the right link. Let’s go to Yahoo Finance, same thing again. At the time when we bought it, it was a 30. This was 30, 30 billion when we bought that Tesla the shares a year and a half, two years ago. Now you put an eight in front of that and it’s almost a trillion dollar company.
Cody: Again, the first thing I look at is the market cap just to get a sense of things and there’s what, five companies in the entire world who have ever been worth a trillion dollars and this might be number six. That’s rarefied air. That company needs to be killing it, doing the best earnings growth, revenue growth, changing the world, revolutionizing things for years to come to be one of those five companies that has ever been worth a trillion bucks. Let’s go look at some financials. Get a sense of gross margins, what do you say people? So you look back a few years ago four years ago, three years ago in 2017, the company was doing 12 billion in sales, 11.7. I round numbers because I’m going concepts, I don’t care about single digit percentages. So $12 billion in sales and it’s costing nine and a half billion, which is not very good gross margins. Less than, what is that? Just over 14% or something 15% maybe at best. Then it got a little better, almost 20% here.
Cody: Then it gets over here and you’re like, “Eh, it’s almost 20% again.” And now we’re like, “Hey, we’re over 20% in the last trailing 12 months.” I like that. That’s the trend I wanted to see when I was buying Tesla. I think they were about to turn the corner and start getting much more profitable. That’s happening. Good, all right I like this stock idea. Okay, good let’s keep going in. Let’s get some financial valuation analysis now. Go over to these analysts, these analyses, these analysts, analysts. Number of analysts 24 covering, a lot of people covering this stock these days. They’re expecting it to earn $4.00 next year. The company has got an $800 stock price, four 800. 878, let’s call it 880 divided by four, 220. A 220 PE, price to earnings ration forward PE. From this year they’re expecting $2.00. So 440, 400, costs $2.40. Call it a 400 PE on this year's earnings which I always try to look at forward.
Cody: And then even try to think out the next year even. Two, four, how many cars could they sell in the next year. What gross margin assumptions can we make? And you can model it out in your mind and end up with six or eight or 10 bucks. I don’t think Tesla is doing $10.00 in earnings next year. Six or eight is possible. So let’s call it normalized, go out two or three years in your mind and say it could be 10. It’s still at an 88 PE. It’s four years out, five years out its PE is still 80 or so. So, again very expensive. Traditionally you want to buy a stock, I mean Graham an old traditional Warren Buffett guys want to buy single digit PEs and sometimes you get the chance to do that, even in great companies like Tesla or Apple when I first bought it. But, more often than not the PEs are going to be higher than that for high growth companies that I like to find.
Cody: But again, if you can wait the whole thing that we do with Training With Cody and that I’ve done with my career here throughout, has been to wait until you get the good valuations and then buy. You can start a little bit, but wait until those valuations get to 10 or 15. The PE in your mind, two years out the PE’s 10. The PE’s five and you get those opportunities. 10 years ago Apple was trading at a five PE in my mind. Facebook when I started buying it, you can go find the analysis I wrote when I first started buying Facebook and I would explain to people how it was trading at 10 times two years out earnings, which made it free because I was going 30, 40, 50, 70% per year top line. Training With Cody subscribers remember that I hope. So, let’s look at the growth rate, $30 billion this year. Well let’s look at the valuation, the price to sale. Revenues to sale, sorry. Revenue to price, sales to price, price to sales revenues numbers here.
Cody: So, 30 billion, you know the market cap like we said was 830 billion. So it’s trading at almost 30 times this year’s top line estimates. Next year it’s supposed to grow 50% to 45, call it 50 billion. So it’s trading at 800 divided 50, 13, 14 times next year’s revenue estimates. So again, very expensive. Revenues are always, your revenue to … your price to revenue multiple is always going to be lower than your earnings, price to earnings multiple because the company has costs, top line is revenue. So, at any rate, it’s still very expensive. 14 times next year’s sales is not cheap, even for a company growing 50%. So, that’s how I do this. That’s it. There’s no magic here. People ask me on Training With Cody chat every week, “Cody will you look at,” and I’ll take two stocks from you guys now, and that’s how I get to where I go. That’s how I do the fundamental analysis.
Cody: Now with Tesla again the top, down analysis was like I was sitting there looking, they had just released the model three at 35, 40,000 bucks. Full self driving was getting really more capable and the prices were starting to go up for full self driving and I bought the car, I bought that car. I actually paid 55 for the model three with all wheel drive because there’s six inches of snow in Ruidoso today, that’s why you need all wheel drive where I live. But, look I bought that because I wanted to test it. I didn’t want the S, I didn’t want the X. I wanted to test the mainstream car and was it ready to revolutionize the mainstream buyer? Could it have hundreds of millions of people buy that car in the next five or 10 years and the answer after I bought it and tested it and drove it for a few days as subscribers can attest was hell yeah. Yeah it’s changing everything. All right questions and, or a couple of stocks you want to talk about?
Speaker 3: Hey Cody, in that last example when you were doing the price, were you using the price divided into, or I’m sorry. The $46 billion number, whatever that was there, I think it was the revenue estimate. Were you dividing that into the share price or the market cap?
Cody: I was doing it into the market cap. That’s a good question because Tesla has just about a billion shares outstanding. So in its particular case its market cap is 800 something and its stock price is 800 something.
Speaker 3: Right.
Cody: But most of the time you go to Apple and its stock price is 1.4 and its market cap is 2,400 billion or 2.4 trillion. So, when you’re doing that, yeah you’re looking at let’s go back to the … Let’s do Apple real quick. Let’s just do price to sales on Apple. So you got 2.4 trillion and the analysts next year are expecting 330 billion. So, eight times next year’s right? Eight times 300 is 2.4.
Speaker 3: Got it. Thanks.
Cody: Other questions?
Speaker 5: Cody, I have a question.
Speaker 5: So just going through that exercise on Tesla, right? So that would from a valuation standpoint it seems Tesla is we’d say overvalued from almost every metric, even when you project out the next five plus years, right? So at that point, at what point do you say, “Okay we should be taking that out of our portfolio?” I know it was a great buy a year plus ago, but at this point are we basically just banking on the market to continue to be irrational or what point should we be moving on?
Cody: Yeah it’s a great question. It’s a great question. The answer is I’ve learned over the years that when you find one of these disrupt, not disruptive I don’t like that term. It’s not big enough. One of these revolutionary companies that’s changing the world; Apple, Google, Facebook, Bitcoin. Not a company, but you get the point. You trim, you hedge along the way. But, I’m betting on Elon and Tesla probably forever. I don’t plan on selling the stock and here’s why. Even with Tesla and it is such a revolutionary concept that’s about to do something that no one else has. If they conquer that self driving, it’s a multi-trillion dollar market cap the next day. When you can summon your car … If you paid, all in you bought a $35,000 model three and you pay, what is it 10 grand right now for full self driving? You pay $45,000 for your car and next year it’s generating $200,000 of income for you when you let it drive 24 hours a day around the town when it’s not charging and doing autonomous people and, or food delivery stuff.
Cody: The Tesla is worth more than you bought it for and that’s one of the things that Elon’s talked about over the years that people don’t take serious. But the concept is real, that if you buy the full self driving car and they conquer it, your car probably doubles in value, triples in value. The car’s worth more than you bought it for. That’s something that’s never happened. Can you think of another product that’s ever been designed to do that? So, there’s something more revolutionary potentially about Tesla than there is than probably any other company I’ve ever owned. Because when you bought an iPhone it didn’t get more valuable five years later, as revolutionary as the iPhone was. Next question.
Speaker 6: Hey Cody, how do you give the score to each stocks? I know you give Tesla a six plus right now and SPCE’s a seven or an eight. But, in terms of execution, Tesla seems to be at a much better place than compared to Virgin Galactic. So, how does execution, manufacturing capability, ability to conquer challenges, how do you factor that into your score?
Cody: Okay, so what he’s asking about once a month, once every six weeks or so I do a review of each of the positions that we have and when I do that I give each one a rating between one and 10, 10 being the perfect investment. There’s never been a 10. Closest thing there is to a 10 it says at the top of every one of these articles I ever write is investing in yourself. But, aside from that, let me go back to speaker view here. There it is. And six gets to be something I probably don’t want in my portfolio. Five is an average stock and if it’s … I mean obviously I probably don’t ever have anything below five in those things because if I ever think something is not average even, I’m out. That’s when I sell it. Going back to that question earlier about when would I sell Tesla? It would be if I decided it was not a good company. It would be if I decided something was wrong about my analysis.
Cody: So, those ratings are reflective of the near term, more so than long term. Those are just like, “Hey in the grand scheme of things is Tesla a grade trade, a great investment at $900 billion market cap where it is at this particular moment?” And the article you’re talking about I think Tesla is probably actually about around 750, and so its rallied even since then. And SPCE when I wrote what you were talking about I think was around 25, because that’s two or three weeks ago that I wrote about it.
Speaker 6: Yeah that’s right.
Cody: Yeah, and so I liked it a lot better at 25. Now at 55 today it’s not an eight. Not even close. SPCE as of today would be a six plus also.
Speaker 6:Okay, thank you.
Cody: And it’s an arc, right? I don’t have … there’s not a formula, an algorithm that I punch stuff into and I’m like, “Oh, it’s a 4.5.” No this is arc. I’m painting, I’m doing my best Dali impression. Deep thoughts, Salvador Dali art. It’s probably what’s going on in my head if I had to guess.
Speaker 6: Thank you very much for that, thank you.
Cody: Another question. “Do you foresee any new affordable stocks to recommend, good value stocks?” And the answer is yeah, absolutely. All the time I’m trying to find them. But, I let this analysis work, I don’t just willy-nilly buying pick them. Here’s the other question, “Can you demo and analyze how you consider, do a value stock for as a comparison to say Tesla and SPCE,” which are not values right now for sure. What is a good value stock right now? Apple’s not even a good value right now.
Cody: I got a traffic jam about to happen in my parking lot. Anybody? I don’t even know value stock. JWN , a good buddy of mine talked about JWN the other day at 35, I should have bought it. You want to do it? Let’s do it. I got to go back to share screen, don’t I? JWN, Nordstrom. Nordstrom’s malls. But they’re not just malls. Other reasons to own it. Let’s look at it. We start off market cap $6 billion . So imagine that Nordstrom is half the value. Nordstrom after all its years in business is worth one half of what Virgin Galactic is worth. Market says your entire company Nordstrom, I say that funny don’t I? Nordstrom, like Sen. Strom. Saying Strom strongly. Let’s go to the profile, what is Nordstrom? Fashion retailer provides apparel shoes, cosmetics and accessories for women, men, young adults and children. It offers a range of brand names and private label merchandise such as Nordstrom Inc., Nordstrom Rack, HauteLook, Jeffrey Boutiques, Clearance stores that operate under last chance, Trunk Club. So it’s a retail, clearly it’s a retailer.
Cody: So, six billion dollars, let’s go look at its gross margins. Gross margins used to be pretty good over there, look at that. That’s 15, nine, what you got about 30% gross margins, 35% gross margins back in 2018. Nice. Fast forward to today, last 12 months clearly the pandemic’s been hurting. That’s probably not indicative so let’s go back to last year, and that’s year ending January 31, 2020 so that’s last year. Those gross margins were still pretty good. I like that. For a retailer, I don’t mind. 35% gross margins is pretty good for a retailer. All right, that’s interesting. Let’s see what the analysis looks like. This year they’re getting killed, but sales were down 30% this year because of COVID. So that’s not, you can’t really extrapolate that out very well. Then you look at next year and they’re supposed to hop 26%. Now let’s do the math by the way does 31% if you drop 31% and grow 26% you’re not even close to getting back to even. You’re not five percent away, you’re still 10 or 15 percent away, right?
Cody: 100, you drop 31, goes to 69. You add 26% of 69, that’s not 26. 18, 20, call it 20. So, 20 plus 69, you’re at 89%. So their sales next year even with them growing 26% are going to be down 10% from that year before that we just looked at 2020. Follow me? So, this is a company that’s still not getting back to even next year, interesting. Is the stock back to even, or was it before COVID? 60ish, now it’s 40. The stock’s not back to even either though. So, I’m thinking out loud guys, you asked me to do this. So, next year they’re going to earn a buck because again they got killed by COVID next year. That’s going to rebound next year. They’ll probably figure out how to be more profitable. A buck forty-seven, the stock’s trading at 40. What’s its PE? 40 divided by a buck fifty somebody? Anybody? 15.
Speaker 3: 26.
Cody: 26, 25? 25, 26? Thank you. Mid-20s. I mean hey, compared to the other stuff we’ve been looking at there’s some value here. It’s 20, I’d rather it be at eight PE then you’d be like, “Wow I’m really buying for eight times next year’s earnings? Let’s do that.” 20 yeah, for a company that’s not even getting back to even. Okay, but why would my buddy like it? The guy who talked about it is brilliant and I take things serious when he tells me to look at things. He’s figuring that look, the omnichannel being able to sell things at the curb and shipping it to you, Nordstrom Rack and Nordstrom.com and their online initiatives are kicking off and this company’s dominant. It’s going to do it. It’s going to pull it off. Now, is it revolutionary? Clearly not. This company’s not changing the world, they’re selling clothes and maybe they do a great job at it. Maybe that’s right for a lot of people.
Cody: And there are times if Nordstrom was at $8.00 right now and this thing I believed was going to earn a buck fifty next year, great trade. I’d totally consider being optimistic and buying it at that level. At 15 bucks and be trading it at eight times next year’s earnings. Yeah man, something like that I’m in for what $12, would be eight times the actual earnings. But then you got something to hang your hat on. By the way, you should just check the balance sheet. I’m going to guarantee you it’s going to be ugly. It’s a retailer that owns a lot of real estate. Going to have mortgages. Balance sheet. Total assets, current assets, cash 800 million bucks. Nothing. Long-term debt, four and a half billion dollars. Now again a lot of that’s mortgages, although look they did something the years before it was two and a half billion for years. What’d they buy? They must have bought something. They probably did an acquisition for two billions dollars right before COVID hit or something.
Cody: Let’s just check. GWN acquisition. No, it doesn’t say anything. Let’s type in Nordstrom acquisitions. See why did they issue all that debt? Does anybody know who’s listening? I mean I clearly don’t follow Nordstrom closely. So I’d love if somebody knows. I guess we could type in Nordstrom debt. There it is acquires two digital, what do you want to bet it’s about two billion dollars. Terms were not disclosed, but you can extrapolate out. They added two billions of debt after doing those acquisitions. So maybe that’s what it was. Anyway, there you go. There you go. The debt scares me too. It’d scare me a lot more if it were not a retailer that has mortgages. But even that, look I like to buy things with really clean balance sheets and this company has five times more debt than it does cash and that’s not clean.
Cody: More questions? When you recommend buying in three tranches what are your thoughts on timing of those buys? It’s an art more than a science again. Sometimes I’ll buy three tranches in a week, sometimes it’ll be over six weeks. Sometimes the stock takes off and I’m like, “I don’t think it’s coming back down. I better do the second tranche right now and other times it comes down and I’m like, “I’m going to space this out a little bit because I think we might have a little more coming down.” And again that’s again where you’re doing a little bit of artsy stuff. There’s no science to all of this. There is science to some of it, but not to all of it. You guys were just asking about stocks. Let’s analyze one more stock together unless you guys have any other questions and then I’ll wrap this up.
Cody: No other questions. Okay, here’s one in the chat that’s a good one. “Cody could you give guidelines for price to sales and price to earnings and what numbers are good, what are bad and what makes something a buy?” Again it’s art. If a company is growing, here’s some general metrics I’ll throw out there for you. If the top line of the company, if the revenue is growing 30% to 40%, 50% per year or more, price to sales well okay. This is a great question. You got to also look at gross margins, okay? Because if a company has 90% gross margins, I’ll pay a hell of a lot more relative on the price to sales, versus a company that’s got 30% gross margins. Because if 90 cents out of every dollar of sales that you generate is falling to the bottom line as earnings, the price to earnings is going to be pretty close to the price to sales too. But if the gross margins are 10% and you’re a distributor and your net margins are one percent, you’re trading at half times sales. Your sales are $10 billion and your valuation is five billion.
Cody: Oh, we didn’t do JWN. Let’s go back to JWN real quick and do its, did we do price to sales? I don’t think we did. I’ll just do it. I’m not going to switch the screens again, but let me do it. JWN, go back to where we were here. There it is. And they’re expecting $13 billion in sales next year and the company’s worth six billion. So that company is trading at one half times sales. Tesla trading at 40 times next year’s sales, or was it 20 times? But you get the point. And SPCE trading at 3,000 times sales. And amazingly I think SPCE is a better value, even at that, even right now than I do think JWN is a value at this moment, a good investment. Doesn’t mean I’m right. JWN, again I respect that guy who told me to buy it. It’s probably going to 100, it’s just not for me.
Cody: All right, one more stock. Someone asked me for the last one, two people asked for JMIA, Jumia. It’s another name that we killed. Bought it at 15 bucks two months ago and now $60 today, a new all time high. Oh, I need to share screen. Share screen, share. Five billion dollar market cap. When we bought it, it was just about a billion and something dollar market cap. So, valuations are not going to be very good, I’m going to tell you right now because they were pretty good at 15. But now it’s up four fold. So, profile just I don’t know if you guys Jumia. Everybody knows Tesla. Jumia is basically like the Amazon of Africa. An e-commerce platform in Africa. It’s also a Shopify play game in Africa. It’s going to help people. It’s going to help create a middle class in Africa. That’s one of the reasons I bought it, wrote about it at the time. I like it. I like that idea of creating a middle class around the world, getting people out of poverty, letting them eat.
Cody: All right, Jumia and not just around the world. United States got hungry people too. We got to feed them. I don’t know if it’s the government’s job. Maybe it’s the church’s job. Maybe it’s somebody’s job. Kids got to eat. Jumia, losing money, $2.00 this year and basically $2.00 next year. Company actually shrank this year. Did you hear about COVID? They’re going to grow 30% this year. Now if they shrink five percent this year and they grow 30% next year, they’re still way ahead where they were when COVID started unlike Nordstrom. So, $200 million in sales. What did we say the market cap was five billion. So, 50 times next year’s sales estimate and it doesn’t even have an earnings estimate. So, again like 50 times next year’s sales is expensive. You need to grow a lot to justify that. I think this company can do it. Let’s see what their gross margins are. You see there? 70% gross margins. You can pay a higher price to sales ratio if the company is 75% on gross margins than one with 35% gross margins.
Cody: So, if you believe that Africa can turn into a multi-trillion dollar market economy and I mean the entire continent, although it will take some countries doing their more than fair share, because as always there will be places that are corrupt and awful and poverty stricken. Hopefully not forever, but some places in Africa are going to do much better than others and where this company focuses, hopefully it’s those places and it’s part of the solution. And if that’s the case, this company could do tens of billions of dollars in sales and kick up a billion dollars or so in earnings some day. And then it’s a good value at five billion dollar market cap. But it was a better value at a billion dollar market cap. I’m exhausted. That was a lot of work. What’s our markets doing? Have they bounced at all? A little. Boy RUT’s barely down. Small caps baby. Why did that go to there? Any last questions? If not I’ll thank you guys for being here.
Cody: All right, I got two last questions simultaneously. I will take the one that I heard and then the other person, whoever was asking, please hop back in. I found Jumia, I even though Jumia looked like a good short when it first came public, a subscriber had asked me about it probably two or three years ago and I never forgot about it and I waited. It was at 40 or 50 when it came public and I waited and I waited and it went down to like five. I think I was even short a little while. And post-COVID this summer, I was looking for good ideas at reasonable valuations and it was still on my screens. Next question?
Speaker 8: Hey Cody, do you consider the Yahoo Finance one year estimate numbers in your calculation?
Cody: The next year estimates, yeah. Yeah that’s what I was using most of the time. I generally look at those analysts. Here, I’ll go back one more time and share the screen. Yeah, this is when you’re looking at next year numbers, you’re going to … this used to be called analysts. They changed it a couple of years ago or a year ago to analysis. I liked it better under analysts because it was analysts’ estimates, all of this is analysis. Anyway, you’re out here and you’re looking at next year’s estimates. Does that answer your question?
Speaker 8: No the main screen you see if you click on the summary page, there is a one year stock price estimate. That’s the number.
Cody: No, no, no, no, no. Like I said, only thing you’re looking on the front page is market cap. I don’t look at anything else on here.
Speaker 8: That’s it. Thank you.
Cody: Where is it? I don’t even see it. One year target estimate, $25. I suppose that’s taking the Wall Street analysts and giving their average price target. And as subscribers will tell you, I don’t care what other analysts think. I’ll read it and try to learn from it, but it’s not really going to drive my analysis, not going to change my mind. I don’t care what Wall Street thinks the stock price should be.
Speaker 8: Okay, thank you.
Cody: Good question though. Thank you.
Guest: I have one.
Cody: Sure John.
Guest: Great. Are you worried about SRAC being a SPAC? I’ve got a lot of people telling me they’re really worried about the SPACs because you really don’t know what they’re going to do.
Cody: I think you take each SPAC individually. The semiconductor industry, that you can talk about. SPACs include electric vehicles to space to SoFi finance to material. So I give each SPAC individual analysis. I’m always concerned about every one of my positions. SRAC is a small part of my space revolution basket at this time. But I like … I feel good about this current price in SRAC as a potential big return long term. Again you need to picture it as a venture capital play. Doesn’t have any revenues. It’s dreaming that it’s going to be able to do, like move satellites around in outer space using water streams. We’re talking some out there stuff. But, if it works it’s going to, this valuation is reasonable.
Guest: I bought some.
Cody: If it doesn’t work it’s going to zero. What’s that?
Guest: I bought some, thank you.
Cody: Yeah. Well and be careful. Because again if it doesn’t work in two years the stock’s going to be at zero.
Guest: I understand. I bought more SPCE.
Cody: Yeah. Yeah you got to bet on Space and I don’t mean the SPCE just Virgin Galactic. You’ve got to divvy it out and for the record in my hedge fund, by far the largest Space position we’ve got is SpaceX. We did a bunch of work a couple years ago to invest in SpaceX in the private markets and then another one called Relativity Space that is also private market. So, they’ve both done very well since we invested in them also.
Guest: Thank you.
Cody: Anybody else? Last dibs.
Guest: Cody?
Guest: The Momentus SRAC, the CEO and the Russian CEO he resigned. How does it change anything at all? If you look at the company, it says if he resign if he cannot get that, what do you call that, the asylum whatever, that it might affect the program.
Cody: I’ll hit on what you’re getting at Vince. Look, the CEO, the founder of SRAC, the same company we were just talking about that could go to zero if it doesn’t work over the next two years or maybe three years, the CEO’s a brilliant Russian citizen. And there’s no way the United States government is going to allow a Russian national to have access and, or contracts with NASA. So, he needed to leave. He either needed like you said to get asylum of some sort or he needed to get green carded or something. He needed to get in the system of the United States citizenry or he needed to get out of the way. Whether it was his choice or the United States’ government choice or the Russian government’s choice which I think it probably is, he’s not going to be allowed to come. So, I don’t think, he’s not Elon Musk. If Elon left, Tesla or SpaceX, I’m gone. But, this ain’t no Elon Musk.
Cody: All right guys, that’s it. Thank you so much. Clearly I don’t have a crystal ball. Clearly there is no science to valuing stocks. But I hope today gave you some grounding and just even perhaps a review for some of you of some of the things you might have forgot to look at sometimes.
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Analyst’s Disclosure: I am/we are long AAPL TSLA JMIA SPCE SPACE SRAC AMZN. Positions can change at any time and without notice.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
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How to Cope with a Stock Market Analysis Assignment
Updated: Aug 22, 2022
Today it is impossible to underestimate the importance of the stock market. This is the heart of the modern economy and an indirect indicator of most economic processes taking place in the world. A good understanding of the stock market allows a competent trader to make money on buying and selling and analyze and predict major economic movements.
It is not surprising that analysis assignments are becoming increasingly popular in economics universities and colleges. Since more and more complex economic tasks are set before the modern student, the demand for professional finance homework help from reputable services is increasing. But are these tasks as tricky as they might seem at first glance? Let's try to figure it out.
What Is a Stock Price Analysis?
The stock price analysis is a financial document that evaluates the current situation and the expected outcome of the activity related to the stock price. The stock price is reflected in the business activity, but you should not confuse it with the actual business activity itself. The stock price is a reflection of all transactions made in the stock exchange market. A positive business activity or a profit influences the stock price; a lower profit or a loss leads to a decrease in the stock price.
It is almost impossible to underestimate the importance of stock market analysis today. Understanding the hidden processes of the market is the key to understanding how the world economy works. Today it is impossible to talk about such an analysis without a deep understanding of global macro trading and the basics of risk management . To cope with the task of the stock market on your own, you will need to conduct deep research and significantly improve your financial literacy.
Why Stock Price Analysis Can Be Challenging
Stock price analysis is an essential topic of study for business students. A great deal of research and analysis goes into the process, but it's sometimes difficult for students to put it all together. This is because stock price analysis integrates several market concepts that are otherwise considered separately, such as the principles of supply and demand, market trends, and price fluctuations. However, there are now platforms that could help business students or investors with a stock price analysis. Some stock research websites offer one-sentence explanations of why a stock's price moved or even real-time intuitive data visualizations and automated stock analysis.
It is not easy to cope with assignments on stock price analysis. You need a clear idea of what the task is about. You should learn to grasp the central concept of a paper, and the rest will be much easier. It is necessary to understand that you are working on a project that has a deadline, so do not procrastinate until the last minute.
The general structure of stock price analysis is as follows: firstly, you have to make a thesis statement after researching and analyzing the data you collect. Secondly, you need to develop a prediction or argument for your thesis statement. You may decide to include different arguments in favour or against your point of view. Thirdly, you need to make sure that your work is structured correctly by using the necessary elements of an academic paper, including an introduction, main body paragraphs, and a conclusion.
It is also necessary to provide sufficient evidence to support your predictions or arguments in your work with a thesis statement on stock price analysis. It is good practice to consider questions such as stock market hedging or some useful financial instruments . The more thoroughly you reveal the question, the more you will impress your teacher.
Applicable Financial Instruments to Get Help with Stock Market Assignments
Macro currency strength meter by logikfx.
Macro Currency Strength Meter is one of the financial instruments that can be used to gain better results for investors working in the foreign exchange market. This is a fundamental concept for traders working within online markets. Each trader can choose to buy different currencies based on particular requirements, risk perception, and specific economic conditions. This can lead to profits, but it also can lead to losses.
The total profit or loss depends on factors like the time frame and the time frame for opening and closing a particular deal. These deals depend on the specific investor's approach and the overall goal he is trying to achieve. For example, if the goal is to maximize profits, more deals will be made even if they do not offer maximum success rates with minimum risks. If the goal is to minimize risks, fewer deals will be made, but they will ensure returns.
Refinitiv Eikon App
The Refinitiv Eikon app was designed to offer investors, traders, and advisors an alternative way of making investment decisions. The app has been designed to present a wide range of global news available on over 15,000 listed companies. The information on stocks and options can help you make informed decisions regarding trading and investing in the market.
The app is fully integrated with the parent platform offering users access to streaming news, markets data, and analytics to help monitor their portfolios. Users can now trade equities via the mobile app between markets in the United States and Europe and the eight exchange markets in the EU, including Germany, France, and Italy.
CNBC Business News and Finance App
The CNBC business update provides an extensive compilation of videos on stocks and the latest business headlines. The app features a stock price tracker, a market index list, and a collection of curated news clips on stocks, commodities, currencies, and the market in general.
This app has been compiled for use by students to look into the stock price changes of a particular company. It is being used as an example for other students to develop a similar project. It is not a comprehensive study of stock price change but rather a snapshot in time, answering specific questions.
The uValue app gives you the information to make wise investment choices. You'll have access to the most current, reliable data from the world's most respected sources in a few clicks. The easy-to-use app covers stock price analysis and investment news for over a hundred countries and enables you to:
● Get data for any date
● Filter Data by market cap, industry, profit margin, and more
● Tap into instant search results that keep you up-to-date on the latest investment news or trending topics, including political news that affects markets around the world
● Enhance your financial literacy by exploring articles written by experts in the field of finance
Final Words
It is practically impossible to overestimate the importance of stock market analysis tasks today. More and more students today are faced with analysis problems and are trying to find simple solutions. You can try to cope with the task in front of you on your own using the tips and instruments from our guide. Or you can always use the professional help of one of the services specializing in solving such problems. A good choice might be AssignmentShark, which has already managed to establish itself well thanks to helping students worldwide.
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How to Build a Diversified Investment Portfolio (With 5 Examples)
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Diversification is about not putting all your eggs in one basket.
Simply put, you can reduce your portfolio's risk by diversifying your money into multiple investments. While it may sound complicated, it's actually pretty simple.
You want to own assets with uncorrelated performance, so everything in your portfolio isn't going up or down at the same time.
Most well-diversified portfolios are a mix of stocks, bonds, and cash. And you can achieve proper diversification with just 3–5 investments.
Plus, that's how several billionaire investors recommend you invest.
Below is a complete overview of how to balance risk and reward, a look at asset classes, and five examples of diversified portfolios.
A note on complexity Before diving in further, it's worth mentioning the following: It's easy for investors to overcomplicate their portfolios. People assume complexity = sophistication. But it doesn't. In investing, simplicity is the true form of sophistication.
Disclaimer: This is not investment advice. This article reflects my opinions based on my knowledge and experience. There are many nuances that I cannot cover in this article. Before investing, always do your own research and due diligence.
Risk tolerance and asset allocation
As an investor, your goal is to balance risk and reward.
To accomplish this, many investors invest in a combination of stocks and bonds . How an investor diversifies (the mix of investments chosen) is known as asset allocation.
You can achieve higher returns by investing in stocks. But stocks also come with larger drawdowns and a greater chance of losing money.
Bond investments, on the other hand, are less volatile but come with lower returns.
Remember, the goal of diversification is not to maximize returns. The goal is to reduce the level of volatility (big price changes up or down) in a portfolio.
You can shape your portfolio's expected risk/reward by changing the amount of money you allocate to stocks and bonds.
The more you allocate to stocks, the higher your portfolio's expected risk/reward. The more you allocate to bonds, the lower your portfolio's expected risk/reward.
If you're a younger investor, you have a longer investing horizon, so your portfolio has more time to bounce back from stock dips. You can allot a higher percentage of your portfolio to stocks. However, the reverse is true as you get closer to retirement.
For this reason, many investors shift their asset mix toward less risky investments as they get older. A simple rule of thumb is to allocate your age (in percentage terms) to bonds and invest the rest in stocks.
Examples of this rule in practice A 20-year-old may invest 20% of their portfolio in bonds and 80% in stocks A 65-year-old may invest 65% of their portfolio in bonds and 35% in stocks
This isn't a perfect formula — you should tailor your portfolio to suit your financial situation and risk tolerance — but it's a good starting point.
Assets and their sub-asset classes
As mentioned above, there are three main assets that make up the bulk of most investors' portfolios: stocks, bonds, and cash.
There are two methods to diversify:
- Across asset classes
- Across sub-asset classes
For example, if you owned 100% stocks, you could diversify by investing some of that money in bonds (across asset classes).
Or, if the stocks you owned were all U.S. companies, you could diversify by investing in some international companies (across sub-asset classes).
To be properly diversified, you can use both of these methods.
When you buy shares of a stock, you're purchasing a part ownership in a company.
Stocks drive much of the growth and investment returns in portfolios. However, this greater potential for growth comes with greater risk and volatility, especially in the short term. To reduce this risk, investors diversify by owning multiple stocks.
To diversify properly, you can invest across a wide range of geographies (U.S., Canada, etc.), sectors (technology, consumer staples, etc.), sizes (large, medium, and small), and valuations (growth and value).
Instead of buying many individual stocks to achieve this level of diversification, you can also buy an exchange-traded fund ( ETF ). An ETF is a single investment that holds a basket of securities.
For example, VOO is an ETF that owns 500 of the biggest companies in the U.S. It follows the S&P 500 index, one of the most popular investments in the world.
By buying VOO, you own all 500 of these companies at once. It's also very inexpensive — the expense ratio is 0.03%, or $3 (per year) for every $10,000 you invest.
If you also want to invest in international stocks, you may buy VT . This ETF holds shares in almost every major publicly traded company in the world.
When you buy a bond, you're lending money to a company, and will be paid interest over time.
While stocks are the main drivers of growth in a portfolio, bonds are used to reduce risk and provide steady cash flows. The downside is that their returns are lower.
A portfolio containing both stocks and bonds will not fluctuate (higher or lower) as much as an all-stock portfolio.
As is the case with stocks, you can buy bonds one at a time or diversify across a broad range of bonds with an ETF. I like TLT , a long-term U.S. Treasury bond ETF, and SGOV , a short-term U.S. Treasury bill ETF.
Cash is any money you have in your checking or savings accounts.
This isn't an investment per se, but you should have cash on hand to cover your monthly expenses and any unexpected emergencies.
Most financial advisors recommend having 6–12 months of living expenses in cash on hand for an “emergency fund.”
Many investors also keep a certain amount of cash on hand in case any investment opportunities present themselves. This cash allows them to act quickly and without needing to sell another investment to free up funds.
This cash can be deposited into a high-interest savings account.
Alternative investments
You can further diversify a portfolio by investing in alternative investments . These include commodities, real estate, cryptocurrencies, private credit , blue chip art , and more.
Alternative investments can generate high returns, but they typically come with equally high risk and volatility. For this reason, most investors (myself included) focus their portfolios on stocks, bonds, and cash.
Five investment portfolio examples
Below are five commonly used and frequently recommended investment portfolios.
All of these example investment portfolios are relatively simple to implement with a few ETFs, which I recommend in parentheses.
1. 60/40 stock-bond portfolio
The 60/40 portfolio is one of the most popular asset mixes used by a broad range of investors, regardless of age.
As its name suggests, 60% of the portfolio is invested in stocks, and the remaining 40% goes to bonds. Most frequently, when deployed by a U.S. investor, the portfolio is split between the S&P 500 (like VOO ) and 10-year U.S. Treasury bonds (like IEF ).
![stock analysis assignment 60 40 Stock Bond Portfolio Pie Chart](https://img.stockanalysis.com/1b75017b-25d9-4957-ad87-bf30c25a1ce8.jpg)
This blended stock/bond portfolio is known for having moderate risk and generating moderate returns.
Potential drawbacks This approach may be too conservative for younger investors and too risky for older investors.
2. Warren Buffett's 90/10 portfolio
On page 20 of his 2013 letter to Berkshire Hathaway shareholders , Warren Buffett outlined the simple investment strategy he set out in his will for his wife's trust.
- 10% short-term government bonds (like SGOV )
- 90% low-cost S&P 500 index tracker, specifically one of Vanguard's (like VOO )
Not only is this an inexpensive (in terms of fees), well-diversified, and easy portfolio to manage, but he believes it will also outperform the vast majority of investors.
![stock analysis assignment Warren Buffet Portfolio Pie Chart](https://img.stockanalysis.com/8162a221-453d-45d9-924c-1e42fb9df1ab.jpg)
Buffett notes, “I believe the trust's long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions, or individuals — who employ high-fee managers.”
Potential drawbacks This portfolio is very stock-heavy and may not be appropriate for older or risk-averse investors.
3. Ray Dalio's all-weather portfolio
Ray Dalio founded Bridgewater Associates, one of the largest hedge funds in the world.
Thinking about which assets perform well under the four economic environments — inflation, deflation, growth, and recession — Dalio and his team constructed a portfolio that you can “set and forget,” regardless of what the future holds.
![stock analysis assignment Ray Dalio Portfolio Pie Chart](https://img.stockanalysis.com/e14ebca4-bc71-4628-bfb8-fcd8365ab68a.jpg)
To achieve this mix, consider the following ETFs:
- Long-term U.S. bonds: TLT
- U.S. stocks: VTI
- Intermediate U.S. bonds: IEF
- Commodities: DBC
The portfolio has largely achieved its goals of reducing volatility and performing pretty well regardless of the economic environment.
Potential drawbacks Lower volatility comes with lower returns — the all-weather portfolio has not kept up with stock-only portfolios. Younger investors who can stomach volatility will likely have better results in a less conservative portfolio.
4. Harry Browne's permanent portfolio
Harry Browne was an author and investment advisor who developed the permanent portfolio investing strategy.
The permanent portfolio has the same investment objective as the all-weather portfolio — to perform well under any set of market conditions — but utilizes one less fund.
The portfolio is made up of equal parts long-term U.S. Treasury bonds (like TLT ), short-term U.S. Treasury bills (like SGOV ), U.S. stocks (like VTI ), and gold (like GLD ).
![stock analysis assignment Harry Browne Portfolio Pie Chart](https://img.stockanalysis.com/e198fbdf-1b48-4201-b988-43eebc337ec4.jpg)
Like Dalio's, Browne's portfolio is known for moderate returns and low-moderate risk .
Potential drawbacks The relatively small portion of the portfolio allocated to stocks reduces the volatility of the portfolio but also limits its upside.
5. The barbell strategy
The barbell strategy is how we at Stock Analysis invest our money.
We like to invest in individual stocks, which gives us the opportunity to outperform the market, but we also believe Warren Buffett is right about investing passively in index funds.
So, we combined the two into the barbell strategy. My portfolio looks like this:
![stock analysis assignment Lincoln Olson Portfolio Pie Chart](https://img.stockanalysis.com/c9b685d9-3896-4c94-a221-c796f0dc4117.jpg)
The bulk of my money is in index funds (primarily VOO and VT ) and short-term U.S. Treasury bills ( SGOV ). The rest is in individual stocks.
Microsoft ( MSFT ), Netflix ( NFLX ), Alphabet/Google ( GOOGL ), Markel ( MKL ), and Shopify ( SHOP ) are my largest individual positions.
Potential drawbacks Although it can generate higher returns, owning individual stocks can result in a more volatile portfolio than passive investing.
The takeaway
Diversification is a relatively simple concept that's fairly easy to achieve.
Three expert investors — Warren Buffett, Ray Dalio, and Harry Browne — reinforced that message by recommending easily implementable, diversified portfolios that only require 2–5 ETFs each.
You can diversify further by adding additional asset classes to your portfolio, such as alternatives, or by being more specific about the sub-asset classes you invest in.
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What Is Technical Analysis?
- How It Works
- Assumptions
- Fundamental vs. Technical Analysis
- Limitations
- Technical Analysis FAQs
The Bottom Line
Technical analysis: what it is and how to use it in investing.
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
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Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.
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- Investing: An Introduction
- Stock Market Definition
- Primary and Secondary Markets
- How to Buy/Sell Stocks
- Market Hours
- Stock Exchanges
- How to Start Investing in Stocks: A Beginner’s Guide
- What Owning a Stock Means
- The Basics of Order Types
- Position Sizing
- Executing Trades
- When to Sell a Stock
- Income, Value, Growth Stocks
- Commissions
- Investing and Trading Differences
- Stocks vs. ETFs
- Stocks vs. Mutual Funds
- ETFs vs. Mutual Funds
- What Is a Bond?
- Bond Yield Definition
- Basic Bond Characteristics
- How to Buy a Bond
- Corporate Bonds
- Government Bonds
- Municipal Bonds
- Options vs. Futures
- Essential Options Trading
- Diversification
- Measuring Investment Returns
- Corporate Actions
- Stock Fundamentals
- Essentials of Analyzing Stocks
- Evaluating Company Financials
- Technical Analysis CURRENT ARTICLE
Technical analysis is a method of evaluating statistical trends in trading activity, typically involving price movement and volume. It is used to identify trading and investment opportunities.
Unlike fundamental analysis, which attempts to evaluate a security's value based on financial information such as sales and earnings, technical analysis focuses on price and volume to draw conclusions about future price movements.
Key Takeaways
- Technical analysis is used to evaluate price trends and patterns and thereby identify potential investments and trading opportunities.
- Technical analysts believe past trading activity and a security's price changes can be valuable indicators of the security's future price movements.
- Technical analysis may be contrasted with fundamental analysis, which focuses on a company's financials rather than historical price patterns or stock trends.
- Technical analysis was introduced by Charles Dow.
Investopedia / Candra Huff
Understanding Technical Analysis
Technical analysis is used to scrutinize the ways supply and demand for a security affect changes in price, volume, and implied volatility. It assumes that past trading activity and price changes of a security can be valuable indicators of the security's future price movements when paired with appropriate investing or trading rules.
Technical analysis' various charting tools are often used to generate short-term trading signals. They can also help improve the evaluation of a security's strength or weakness relative to the broader market or one of its sectors. This information helps analysts improve their overall valuation estimate.
Technical analysis as we know it today was first introduced by Charles Dow as the Dow Theory in the late 1800s. Several noteworthy researchers including William P. Hamilton, Robert Rhea, Edson Gould, and John Magee further contributed to Dow Theory concepts. Nowadays, technical analysis has evolved to include hundreds of patterns and signals developed through years of research.
How Technical Analysis Is Used
Professional analysts often use technical analysis in conjunction with other forms of research. Retail traders may make decisions based solely on the price charts of a security and similar statistics. But practicing equity analysts rarely limit their research to fundamental or technical analysis alone.
Technical analysis can be applied to any security with historical trading data. This includes stocks, futures , commodities , fixed-income securities, currencies, and more. In fact, technical analysis is prevalent in commodities and forex markets where traders focus on short-term price movements.
Technical analysis attempts to forecast the price movement of virtually any tradable instrument that is generally subject to forces of supply and demand. Some view technical analysis as simply the supply and demand forces reflected by the market price movements of a security.
Technical analysis most commonly applies to price changes, but some analysts track numbers other than just price, such as trading volume or open interest figures.
Technical Analysis Indicators
Hundreds of patterns and signals have been developed by researchers to support technical analysis trading. Technical analysts have also developed numerous types of trading systems to help them forecast and trade on price movements.
Some indicators focus primarily on identifying the current market trend, including support and resistance areas. Others focus on determining the strength of a trend and the likelihood of its continuation.
Commonly used technical indicators and charting patterns include trendlines, channels, moving averages, and momentum indicators.
In general, technical analysts look at the following broad types of indicators:
- Price trends
- Chart patterns
- Volume and momentum indicators
- Oscillators
- Moving averages
- Support and resistance levels
The CMT Association supports the largest collection of chartered or certified analysts using technical analysis professionally around the world. The association's Chartered Market Technician (CMT) designation can be obtained after three levels of exams that cover both a broad and deep look at technical analysis tools.
Underlying Assumptions of Technical Analysis
Technical analysis attempts to decipher the market sentiment behind price trends by looking for price patterns and trends.
Charles Dow released a series of editorials discussing technical analysis theory. He had two basic assumptions that continue to form the framework for technical analysis trading.
- Markets are efficient with values that represent factors that influence a security's price.
- Even random market price movements appear to move in identifiable patterns and trends that tend to repeat over time.
Today the field of technical analysis builds on Dow's work. Professional analysts typically accept three general assumptions:
- The market discounts everything: Technical analysts believe that everything from a company's fundamentals to broad market factors to market psychology is already priced into a stock. The Efficient Markets Hypothesis (EMH) draws a similar conclusion about prices. The only thing remaining is the analysis of price movements, which technical analysts view as the product of supply and demand for a particular stock.
- Price moves in trends: Technical analysts expect that prices, even in random market movements, will exhibit trends regardless of the time frame being observed. In other words, a stock price is more likely to continue a past trend than to move erratically. Most technical trading strategies are based on this assumption.
- History tends to repeat itself: The repetitive nature of price movements is often attributed to market psychology, which tends to be very predictable and based on emotions such as fear and excitement. Technical analysis uses chart patterns to analyze these emotions and subsequent price movements to understand trends. While many forms of technical analysis have been used for more than 100 years, they are believed to be relevant still because they illustrate patterns in price movements that often repeat themselves.
Fundamental Analysis vs. Technical Analysis
Fundamental analysis and technical analysis, the major schools of thought when it comes to approaching the markets, are at opposite ends of the spectrum. Both methods are used to research and forecast future trends in stock prices , and like any investment strategy or philosophy, both have their advocates and adversaries.
Fundamental Analysis
Fundamental analysis is a method of evaluating securities by attempting to measure the intrinsic value of a stock. Fundamental analysts study everything from the overall economy and industry conditions to the financial condition and management of companies. Earnings , expenses , assets, and liabilities are all important characteristics of fundamental analysis that help analysts determine the fair value of a business.
Technical Analysis
Technical analysis differs from fundamental analysis in that the stock's price and volume are the only inputs. The core assumption is that all publicly known fundamentals have factored into price; thus, there is no need to pay close attention to them. Technical analysts do not attempt to measure a security's intrinsic value, but instead, use stock charts to identify patterns and trends that suggest how a stock's price will move in the future.
Limitations of Technical Analysis
1. For some analysts and academic researchers, the EMH demonstrates why no actionable information is contained in historical price and volume data. However, by the same reasoning, nor should business fundamentals provide actionable information. These points of view are known as the weak form and semi-strong form of the EMH.
2. Another criticism of technical analysis is that history does not repeat itself exactly, so price pattern study is of dubious importance and can be ignored. Prices seem to be better modeled as a random walk.
3. A third criticism of technical analysis is that it works in some cases but only because it constitutes a self-fulfilling prophecy. For example, many technical traders will place a stop-loss order below the 200-day moving average of a certain company.
If a large number of traders have done so and the stock reaches this price, there will be a large number of sell orders, which will push the stock price down, confirming the movement traders anticipated.
Then, other traders will see the price decrease and sell their positions, reinforcing the strength of the trend. This short-term selling pressure can be considered self-fulfilling, but it will have little bearing on where the asset's price will be weeks or months from now.
In sum, if enough people use the same signals, they could cause the movement foretold by the signal. However, over the long run, this sole group of traders cannot drive the price.
What Assumptions Do Technical Analysts Make?
Professional technical analysts typically assume three things. First, the market discounts everything. Second, prices, even in random market movements, will exhibit trends regardless of the time frame being observed. Third, history tends to repeat itself. The repetitive nature of price movements is often attributed to market psychology, which tends to be very predictable.
What's the Difference Between Fundamental and Technical Analysis?
Fundamental analysis is a method of evaluating securities by attempting to measure the intrinsic value of a stock. The core assumption of technical analysis, on the other hand, is that all known fundamentals are factored into price; thus, there is no need to pay close attention to them. Technical analysts do not attempt to measure a security's intrinsic value, but instead, use stock charts to identify patterns and trends that might suggest how the security's price will move in the future.
How Can I Learn Technical Analysis?
Your first step is to learn about investing, stocks, markets, and financials. This can be done through books, online courses and materials, and in-person classes. Once you understand the basics, you can start studying technical analysis .
Technical analysis is a longstanding method of analyzing the price and volume data of securities to determine future price action. This data usually appears on charts. Investors and professional traders apply a variety of technical indicators to these price and volume charts to draw conclusions and make decisions about entry and exit points for trades.
John J. Murphy. "Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications," Page 23. Penguin, 1999.
CMT Association. " Enroll in the CMT Program ."
CFA Institute Research Foundation. " Technical Analysis: Modern Perspectives ," Page 1.
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The assignment of a final Schwab Equity Rating depends on how well a given stock scores on each of the factors and then how that stock stacks up against other stocks within the same sector and market cap group. Schwab does not recommend the use of technical analysis as a sole means of investment research.
Stock analysis is a method for investors and traders to make buying and selling decisions. By studying and evaluating past and current data, investors and traders attempt to gain an edge in the ...
Fundamental analysis is a method of evaluating a security in an attempt to measure its intrinsic value , by examining related economic, financial and other qualitative and quantitative factors ...
Step 3: Perform technical analysis. Doing technical analysis requires you to have access to charts like candlestick charts. Pick a time frame, whether intraday for trading or daily, weekly, or monthly charts for swing trading and investing. Look to find support and resistance levels along with the direction of the trend.
Technical analysis in stock investing is based on several key assumptions: 1. Prices move in trends. A very important assumption in technical analysis, the stock you analyze will follow a certain past trend rather than move randomly. Stock prices move based on short-, medium-, and long-term trends. 2.
Forex Analysis and Trading: Effective Top-down Strategies Combining Fundamental, Position, and Technical Analyses. John Wiley & Sons, 2010. AS, Suresh. "A study on fundamental and technical analysis."
Here are three important key metrics to consider when performing a technical stock analysis: Market Action. Also known as price action, this is all about the price movement specific to a particular stock. Price Trend. When the price moves as expected for some time, it tends to fall into an observable trend.
Fundamental Analysis of Apple Stock. It is a good idea to look at the company's most current financial statements before analyzing a stock. In most circumstances, the earnings of a corporation can be seen on its website. For example, here is Apple's Q4 2020 financial report: Net sales = $111,439 vs $91,819*.
3. Turn to qualitative stock research. If quantitative stock research reveals the black-and-white financials of a company's story, qualitative stock research provides the technicolor details ...
Search for a stock to start your analysis. Accurate information on 15,000+ stocks and funds, including all the companies in the S&P500 index. See stock prices, news, financials, forecasts, charts and more. Trending: NVDA, AAPL, TSLA, MSFT.
45 Solved & Fully Explained Assignments To Practice Stock Market Technical Analysis To Trade Stocks , Options & Forex. Understand GenAI: 9 Unique Ways View Close Class Central. ... Technical Analysis Stock Trading -Practice Assignment Course. via Udemy Help 2K ratings at Udemy Add to list Mark complete
Your assignment's introduction is essential for drawing the reader in and establishing the context for your analysis. Start by making an interesting introduction that emphasizes the importance of stock valuation. To give context for your analysis, give a brief overview of the business and sector you are analyzing.
This stock market vocabulary worksheet is very simple and straightforward and will help you reinforce a lesson on understanding how to maneuver the stock exchange (links to the worksheets are all the way at the bottom). Psst: don't forget to download the answer key - that has all the definitions on it. 5.
Types of Stock Analysis. Stock analysis can be grouped into two broad categories: 1. Fundamental Analysis. The fundamental stock analysis method involves the evaluation of a business at a basic financial level. Investors use fundamental analysis to determine whether the current price of a company's stock reflects the future value of the company.
Investors can look at PEG for different historical periods to make an informed guess about future trends. To calculate PEG, divide a stock's P/E by its projected 12-month forward revenue growth ...
These methods involve calculating multiples and ratios, such as the price-to-earnings (P/E) ratio, and comparing them to the multiples of similar companies. For example, if the P/E of a company is ...
So in its particular case its market cap is 800 something and its stock price is 800 something. Speaker 3: Right. Cody: But most of the time you go to Apple and its stock price is 1.4 and its ...
Stock Analysis Assignment (Fin 470) Follow the below format & instructions for your stock analysis. You grade will be based on completing the below instructions in a coherent (well written) and convincing (well argued) way. You must choose a company to analyze for which you can obtain the below listed information.
Fixed Income Allocation by Credit Quality Analysis as of:2020-10-30 The above Fixed Income Allocation by Credit Quality only includes fixed income securities and mutual funds and ETFs. This Report leverages ratings from Moody's, S&P, and Fitch. In the case where a security is rated by all three agencies, the middle of those three ratings is used.
Today it is impossible to underestimate the importance of the stock market. This is the heart of the modern economy and an indirect indicator of most economic processes taking place in the world. A good understanding of the stock market allows a competent trader to make money on buying and selling and analyze and predict major economic movements. It is not surprising that analysis assignments ...
A simple rule of thumb is to allocate your age (in percentage terms) to bonds and invest the rest in stocks. Examples of this rule in practice. A 20-year-old may invest 20% of their portfolio in bonds and 80% in stocks. A 65-year-old may invest 65% of their portfolio in bonds and 35% in stocks. This isn't a perfect formula — you should tailor ...
Technical analysis is a trading tool employed to evaluate securities and attempt to forecast their future movement by analyzing statistics gathered from trading activity, such as price movement ...