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Common Cents Investment Group

Common Cents Investment Group. Welcome! Monday September 23 th. Agenda. Market update Market news Industry movement Choosing a brokerage firm Fundamental analysis Random stock pick & discussion Investopedia. Today in the Market.

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Common Cents Investment Group

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  1. Common CentsInvestment Group Welcome! Monday September 23th

  2. Agenda Market update Market news Industry movement Choosing a brokerage firm Fundamental analysis Random stock pick & discussion Investopedia

  3. Today in the Market http://www.thestreet.com/video/12045670/debt-doldrums-drag-on-markets.html • Apple sales for new iPhone break record • Fed says economy is still too weak to taper • Fiscal cliff: tax increases, spending cuts • House polarized • Blackberry hoping to get bought

  4. Blackberry

  5. Today’s Winners record sales for new iPhone improved earnings

  6. Today’s Losers alleged improper financial disclosures made prior to IPO

  7. Brokerages • Broker – someone who manages transactions between buyer and seller for a commission • Online brokers are probably what you will use • Execute all trades over internet • Online research • Trading platforms • Help

  8. Brokerages http://www.nasdaq.com/investing/online-brokers/

  9. Example Trading Platform

  10. Example Trading Platform

  11. estimize.com

  12. What is Fundamental Analysis? • Goal is to measure value of security by looking into economic and financial factors • Takes into account both macro and micro economic factors • Long term investing http://finance.yahoo.com/video/retire-millions-184800733.html

  13. How a Share Price is Formed • $10 stock isn’t necessarily “cheap” • $250 stock isn’t necessarily “expensive” • Actual share price not used in valuing company • Share price = • Shares outstanding varies by company • Example: AAPL • = $467.41 http://www.investopedia.com/articles/stocks/08/stock-prices-fool.asp

  14. Stock Splits • Typical 2:1 split • No change in value, but draws attention to stock • Foreshadow good news (earnings, etc.) • Increase liquidity • More “affordable” • 235 splits in 1997 • Also see 1:2 reverse split (rare) • Why do this?

  15. 2:1 Stock Split – SBUX example • Current: $75.00 • Market cap: $56.8B • Shares outstanding: 757 million shares • New: $37.50 • Market Cap: $56.8B • Shares outstanding: 1514 million shares • Each owner has 2x shares • No dilution (same market cap)

  16. Split Example

  17. What stats to look for? • Price/Earnings (P/E) • Price/Book • Price/Sales • Return on Equity (ROE) • Return on Assets (ROA) • Price/Earnings/Growth(PEG) • Revenue Growth • Net Income Growth • Operating Margin % • Net Margin % • Debt/Equity

  18. Price/Earnings • Value investor range • 5 to 20 • Company with high future growth prospects may have high P/E TTM • Sometimes Forward P/E is more relevant Great more comparing within same industry! Example: Home Depot vs. Lowe’s HD Price: $77.00 TTM Earnings: $3.38 P/E = = 22.8 L Price: $47.00 TTM Earnings: $1.67 P/E = = 28.4

  19. Price/Book • What investors are willing to pay for real-world tangible assets • Value investor • P/S < 1.5 • Example: U.S. Steel vs. Nucor Corp. X Price: $20.52 Book: $22.80 P/S = = 0.9 NUE Price: $50.37 Book: $23.99 P/S = = 2.1

  20. Price/Sales • What investors are willing to pay for company’s sales • Only useful in comparing in same industry • Useful when P/E = none, last remaining ratio to value business • Should look at debt also • Value investor • P/S < 1.0 • Example: Panasonic vs. Sony PCRFF Price: $9.37 Sales: $32.44 P/S = = 0.3 SNE Price: $21.36 Sales: $21.30 P/S = = 0.3

  21. Return on Equity (ROE) • Profit generated from money shareholders invested • Growth investor • ROE 15<x<25 • Example: Microsoft vs. Oracle MSFT ROE = 30.1% ORCL ROE = 24.7%

  22. Return on Investment (ROI) Timken (TKR) Sold $62.88 Bought $46.43

  23. Price/Earnings to Growth (PEG) Breakdown PEG > 1 Overpriced PEG = 1 Fair Value PEG < 1 Underpriced Ford (F) Predicted P/E 10.7 (Better) Current PEG 0.8 < 1 (Very Good) Current P/E 11.4 (Pretty Good)

  24. Operating Margin This percentage indicates the amount of money that is left for fixed costs, so a higher % is better. Norfolk Southern (NSC) *Numbers in thousands **Taken from income statement

  25. Debt/Equity Ratio This % can show the aggressiveness of management to grow and is often large. *Numbers in thousands **Taken from balance sheet

  26. Benjamin Graham • Wrote Security Analysis & The Intelligent Investor • Warren Buffet bases his trading off it • Formula for valuing equities • EPS: last 12 month EPS • g: 5 year growth estimate • Y: current yield on 20 year AAA corporate bonds

  27. Benjamin Graham Example • XOM  $87.72 • EPS: $7.62 • g: 1.67% • Y: 4.93% • 80.52

  28. Random Stock Pick (S&P 500) • Stock = • Price = • P/E = • ROE = • PEG = • Operating Margin = • Debt/Equity = • EPS = • g = • Value =

  29. Donors Play • New fundraising program • Test out new apps! • Play new game each week for 5 minutes • Text in number:  650-319-7142 • Group name: ccig http://www.youtube.com/watch?v=bYO1v8Xt6BE&feature=youtu.be

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