Stock Trading 102

Seminar

Arlen Novelli, Sesame Chen, Stefan

Filipovic and Abby Holtan

Stock Market Success

Understand goal

Generate idea

Avoid gambling mentally

Follow economic indicators

Company Analysis

Management

Service/Products

Financial Health

Stock Price Evaluation

LOOK AT YOUR LIST OF TERMS!!!

AIG – American

International Group

Company Overview

• Multinational, operates in more than 130 countries.

• 88 million customers. 62,000 employees.

• “Together, we’re working to help see, build, and secure a better future for everyone.”

Management

Robert H. Benmosche -President and Chief Executive Officer.

7M Annually

2009

Alfred University

New York

Services and Products

Accident and health.

Annuities.

High Net Worth.

Insurance.

Marine and Inland Marine.

Travel.

Warranty.

Competition

Met Life, Inc. $36.43

Traveling Companies, Inc. $81.46

Manulife Financial Corp. $14.95

Aflac, Inc. $51.01

Financial Health

$64B revenue in 2011.30% of revenue out of the USA and Canada.

Recently paid off debt with the US government.

Total of benefits, claims and expenses.$65,302 (2011) $59,590 (2010)

Financial Health cont.

Year-end balance sheet data:

Total assets 555,773

Total investments 410,438

Total liabilities 441,444

Total AIG shareholders’ equity 104,951

Total equity 105,806

Stock Price Evaluation

Previous close 38.07

Today’s open 38.28

Day’s range 38.21 - 38.90

Stock Price Evaluation cont.

Earnings growth (last year) -18.48%

Earnings growth (this year) +271.81%

Earnings growth (next 5 years) +10.00%

P/E ratio 2.5

EPS $1.64

Methods

Public information – Financial

Stocks, Finances, Market, Investments.

Apple

Apple, in the past 6 Months

“you should never invest in any idea that you cannot illustrate with a crayon.”

“ The only value of stock forecasters is to make fortune tellers look good. “

--Warren Buffett

Apple: product, service

More innovative

Sleek design

Novel software

Good quality

Product integration

Perfect service

Apple: Management

Analyses for Apple

Fundamental analysis—used for test if you pick the right stock

Technical analysis—appropriate the right time and price to buy it

Analysis for apple

Fundamental analysis

Profitability ratios

ROA may not used for personal computer industry

Valuation Rank

Compares earning, cash flows and sales to market value (intrinsic value & market value)

Apple vs. Google

Apple vs. Industry leader

Technical analysis

Technical analysis

Extremely complicated

MACD, KDJ, BOLL, etc

Affected by psychology of shareholders

Data only, no industry background needed

MACD

Home Depot

Background

What is Home Depot?

Current chairman and CEO

HD Supply

Competitors

Major shareholders

Recent Activity

Key Statistics

Fiscal year ends: Feb. 2nd

Total market capitalization for all publically traded companies: $15,640,707,100,000

Total market capitalization for Home Depot, Inc.: $103.80B

Price/Earnings Ratio: 23.39

Number of shares of common stock outstanding: $1,523,263,533

Industry

Sector: Services

Industry: Home Improvement Stores- 11 Stocks

Home Depot vs. the industry leader (KGF.L)

1. Market Cap comparison

2. Price per share

3. Price/Earnings Ratio

Industry Continued

Financial Health

Total Revenue- $70,395,000

Cost of Revenue- $46,133,000

= Gross Profit= $24,262,000

Total Current Assets- $14,520,000

Total Assets- $40,518,000

Total Current Liabilities-

$9,376,000

Total Liabilities- $22,620,000

Total Stockholder Equity- $17,898,000

Total Operating Expense- $18,755,000

Total Debt- $10,788,000

Total Cash Flow- $6,651,000

Determining Financial Health

Total Cash Flow- $6,651,000

Cash Flow Growth Rate- 10.28%

Earnings Growth Rate- 13.40%

Debt-to-equity ratio- 0.6073(2012)0.6027(2011)0.5161(2010)

Return on equity- 25.42%

Gross Profit Margin- 34.37%(2012)34.27%(2011)33.87%(2010)

Smith & Wesson

Smith and Wesson

History of the Company:

Horace Smith and Daniel B. Wesson

First partnership in 1852

Second in 1856

Introduced the Model 10

NASDAQ Dozen

Revenue-Pass

Earnings Per Share-Pass

Return on Equity (ROE)-Fail

Analyst Recommendations-Pass

Positive Earnings Surprises-Pass

Earnings Forecast-Fail

Earnings Growth-Pass

PEG Ratio-Pass

Industry Price-Earnings

Days to Cover-Fail

Insider Trading-Pass

Weighted Alpha

Strength of Company Stock

Pass: 8

Fail: 4

8:4

Moderate