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Fundamental Analysis Workshop Series Session Five – Picking the Right Stocks (Part I) - Top Down Analysis

Fundamental Analysis Workshop Series Session Five – Picking the Right Stocks (Part I) - Top Down Analysis. DISCLOSURES & DISCLAIMERS. This research material has been prepared by NUS Invest.

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Fundamental Analysis Workshop Series Session Five – Picking the Right Stocks (Part I) - Top Down Analysis

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  1. Fundamental Analysis Workshop Series Session Five – Picking the Right Stocks (Part I) - Top Down Analysis

  2. DISCLOSURES & DISCLAIMERS This research material has been prepared by NUS Invest. NUS Invest specifically prohibits the redistribution of this material in whole or in part without the written permission of NUS Invest. The research officer(s) primarily responsible for the content of this research material, in whole or in part, certifies that their views are accurately expressed and they will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this research material.

  3. DISCLOSURES & DISCLAIMERS Nothing in this research material constitutes a representation that any investment strategy or recommendation contained herein is suitable or appropriate to a recipient’s individual circumstances or otherwise constitutes a personal recommendation. It is published solely for information purposes, it does not constitute an advertisement and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. The research material should not be regarded by recipients as a substitute for the exercise of their own judgement. Any opinions expressed in this research material are subject to change without notice.

  4. SYLLABUS

  5. INTRODUCTION

  6. PROFILE • NUS Invest Research Analyst • Year 2 BBA • Pure Fundamental Analysis

  7. Agenda • Knowing About the Company and Its Business • Industry and Competitive Analysis • Thematic and Economic Outlook • What does it all mean to you

  8. Knowing About the Company and Its Business

  9. What’s There to Know? • What does the company actually do to make profits? • What businesses the company actually engages in?

  10. Why so important? • Important to know the revenue model of the company (Sustainable or not) • Indication of business risk profile (Under diversification VS Over diversification) • Understand drivers of the business

  11. Revenue Model • Stable or Cyclical Revenue? • E.g, BreadTalkvs OSIM (Food and Beverage vs consumer durables) • Think about sustainability and growth for the future

  12. Breadth of the Business • Related vs Unrelated lines of business • Upstream and Downstream integration • Gives an indication of the amount of risk/opportunities the firm is exposed to • Eg. SPH (Print business and Property Business)

  13. Products and Services • Shows the diversity and number of revenue streams the firm has • Tells us what kind of customers the firm deals with

  14. Example – SingTel • Offers telecommunications service, cable TV and broadband internet service • Controls Optus from Australia • Services customers from different regions with different needs

  15. Industry and Competitive Analysis

  16. Industry and Sector Outlook • Need to analyse the overall trend of the industry (Growing or Sunset industry) • Eg. Renewable Energy vs Diesel Distribution • Relates to Thematic Investing

  17. Industry and Sector Outlook • Understand important events pertaining to the industry • Eg. New patents (Pharmaceuticals), New innovations (Film vs Digital), Regulations (Finance Industry)

  18. Why so important? • Gives indication of future growth potential of the industry • Understand how sensitive the industry is to macro factors

  19. Competitors • Market Structure of the industry • Highly Competitive or Monopolistic • Local, Regional or International Competition • Tells us the stability of firm’s profits with respect to the actions of competitors • Eg. (Samsung vs Apple)

  20. Economic and Thematic Plays

  21. Geo Political Outlook • Change in Policies/Policy Stance • Change in Leadership • Political and Military Antagonism • Adds uncertainty to the profitability of firms in the region in question • Eg. China vs Japan, North Korea antagonism

  22. An Example – SGX Acquisition • SGX acquisition effort of ASX • Australian regulators were reluctant to accept SGX’s offer due to sensitive control issues • SGX did not manage to buy over the large revenue stream of ASX

  23. Economic Indicators

  24. Thematic Investing • Investing by identifying global trends and drivers of businesses

  25. Consider the Current Themes • By no means exhaustive • China’s transition from investment driven growth to consumer driven growth • Clean and Sustainable Energy • Quantitative Easing • European Recovery • The Big Picture

  26. What does it all mean to you

  27. Priced In • How do we know information is already factored into the price • Efficient market Hypothesis • Determine by looking at charts (Any sharp movements in prices?)

  28. An Example – SC Global

  29. What does this all mean to an Investor • No fixed investment philosophy • Determine which kind of information is best for making your judgement

  30. Q & A

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