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How to Find Stocks
GMG Investing Criteria
1. Economic Moats2. Market Leader3. Healthy Financials4. Rational Valuation5. Positive Earnings Trend6. Secular Trends
GMG Investing Criteria
1. Economic Moats– Unique market advantage– Significant barriers to entry to maintain long run growth
2. Market Leader– Management theory predicts industry leaders perform
best over time– Proven business model within industry– Best positioned for taking advantage of industry growth
GMG Investing Criteria
3. Healthy Financials– Debt coverage/leverage– Sustained operating margins– Revenue/NI growth – CapEx expenditures and reinvestment
4. Rational Valuation– P/E ratio and Boom/Bust macro context– EV/EBITDA trading multiple– DCF, intrinsic valuation
GMG Investing Criteria
5. Positive Earnings Trend– Dividends and EPS– Earnings trends and analyst expectations– Understanding causes of revenue growth
6. Secular Trends– Growth potential of country and industry sector– Other macro trends e.g. interest rates/commodity prices
Top-Down Approach Begins with Macro
Macroeconomic Analysis1. Current State of Global Economy2. Global trends3. Analyze industry of focus4. Pick industry leaders
Top-Down Approach: Current State of Global Economy
• Current State of Global Economy– Chinese economic growth slowing– Recent equity market volatility– Oil supply glut ~ $32/Barrel– International policy uncertainty • Brexit and Grexit• US Fed roadmap• Moving exchange rates
Brent Crude Price Chart
Euro to USD
Top Down Approach: Global Trends• Global Trends– Depressed oil prices: Winners and losers
• Favorable consumer trend for net oil importers: Poland, India, Chile, and Kenya
• Economic uncertainty for net oil exporters: Nigeria, Russia, and Venezuela
– Appreciating USD relative to other EM currencies• Positive outlook for manufacturing and export industries• Decreases purchasing power of citizens
– Chinese economic turbulence• Slowing GPD growth and signs of financial market
uncertainty plague equity investments• Government tightening control of financial regulations
Movements in ForEx
Chinese Non-Performing Loans
Top Down Approach: Pick an Industry
• Healthcare Industry Sector– EM markets have seen a very large growth in
pharmaceutics sales: Brazil, Russia, India, China, and South Africa
– Rising drug prices are an opportunity for BioSimilar drugs
– New tech advances: wearable technology, patentable R&D findings (pipeline)
– Opportunities in generics and hospital facility development in EM markets
Top-Down Approach: Industry Leaders
• Identification Sources– Bloomberg News– Wall Street Journal (WSJ)– Financial Times (FT)– Seeking Alpha
• Use Bloomberg Industry Market Leaders: http://www.bloomberg.com/visual-data/industries/rank/name:market-share
Bottom-Up ApprochFinding stocks based on our Investment Criteria
Use various Stock Screeners
1.Bloomberg Terminal Screener*
2.www.4-traders.com Screener
3.finviz.com Screener
4.Reuter Screener
5.Brokers Screener - Interactive Broker’s
Bloomberg Terminal: EQS Function
Hit “EQS” then “GO” in the terminal
Why BB Terminal?• Fancy and Cover broad markets• ***BB can exclude some interesting
companies if they dont have information.• LEARN HOW TO USE IT! BB is really powerful.
EQS 101
Select Regions
Select Sectors
Save as PDF, Excel
Back Testing
Alternative way to spot LEADER
4-Trader Screener
Relative Strength - Leaders
Relative Strength - Leaders
Finviz Screener
Reuter Screener
Reuter Screener
Interative Broker Screener
Interative Broker Screener
Watch Lists
Portfolio Management Tools
Portfolio Management Tools
Portfolio Management Tools