17 Investment Analysis (everything else)

technical analysis

research that seeks to predict the future price movement of a stock or overall market by using price movement, volume indicators, and charts of stock history

• good for short term price trends and determining specific TIME to buy or sell

• trend lines, resistance / support levels & breakouts, moving average, market strength (overbought or oversold), short interest ratio, odd lot theory, advance/decline index/line, put/call ratio

fundamental analysis

using a company’s financial statements, management, marketing strategies, & research and development as a means of predicting the future, long-term price movement of stock

• best way to decide on if to buy or sell

• where all the ratios come in

strategic asset allocation

selecting a target asset allocation, the proportion to be invested in different types of securities

tactical asset allocation

process in which minimum and maximum limits are set for each asset classes portfolio proportion, allows manager to shift portfolio emphasis based on market conditions

consolidating market

when a stock is moving within a narrow range with no major upward or downward movement, said to be moving sideways

overbought

if market is rising on decreasing volume, advance is weakening, downturn is expected. selling is expected, bearish

oversold

if market is falling on decreasing volume, fall is weakening, upturn is expected. buying is expected, bullish

what is monetary environment

shows interest rate levels and future expectations for interest rates based on monetary and fiscal policy

odd lot theory

small, individual investors who enter trades of less than 100 are usually misinformed. if odd lot investors are buying, its time to sell

advance/decline index

• if advance outnumbers decline: market is advancing in strength

• if decline outnumbers advance: market is falling broadly

put / call ratio

• more put buying = rise in bearish sentiment

• more call buying = rise in bullish sentiment

book value

• theoretical value of company that remains if all assets are liquidated (at value on balance sheet) at liabilities are paid off with proceeds. intangible assets excluded

• for securities: accounting value used to value the securities on holders books (net tangible asset value per share)

what does CAPM stand for and do?

capital asset pricing model is a methodology for finding most efficient investments, those that give greatest return for amount of risk assumed

short interest ratio

a stocks price will rise after a large amount of short selling, short sellers will eventually have to buy shares in the market to close out their positions

non-cyclical stock

aka defensive stock, low beta, not affected by business cycles. offer stability regardless of market conditions and trends

• electric & gas utilities, railroad, pharmaceuticals

beta

measures stock price volatility compared to volatility of S&P 500

cyclical stock

stock value of companies whose market value & performance changes directly w phases of business cycle

• growing tech company, home building, car makers

contrarian market theory

• short interest theory

• odd lot theory

• put/call ratio theory

contrary indicator is info used to establish market sentiment (bullish or bearish) to which investor takes opposite position.

counter-cyclical stock

stock value of companies who’s market value and performance move opposite to phases of business cycle. these may offer growth in downtrend

• food (income declines, people eat out less and eat in more)