PowerPoint Presentation

Fundamental Analysis Workshop Series

Session Five Picking the Right Stocks (Part I) - Top Down Analysis

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SYLLABUSSEMESTER 2WK 2Introduction to Stock InvestingWK 4

Art of Reading Annual ReportsWK 5Dividend InvestingWK 6Picking the Right Stocks(Part I) Top Down AnalysisRECESS WEEKWK 7Picking the Right Stocks (Part II) Bottom Up AnalysisWK 8Portfolio Management for the Retail InvestorWK 9Case Study 1WK 10Case Study 2WK 11Case Study 3INTRODUCTION

PROFILENUS Invest Research Analyst Year 2 BBAPure Fundamental Analysis

AgendaKnowing About the Company and Its BusinessIndustry and Competitive AnalysisThematic and Economic OutlookWhat does it all mean to you

Knowing About the Company and Its Business

Whats There to Know?What does the company actually do to make profits?What businesses the company actually engages in?

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

Revenue ModelStable or Cyclical Revenue?E.g, BreadTalk vs OSIM (Food and Beverage vs consumer durables)Think about sustainability and growth for the future

Breadth of the BusinessRelated vs Unrelated lines of businessUpstream and Downstream integrationGives an indication of the amount of risk/opportunities the firm is exposed toEg. SPH (Print business and Property Business)Products and ServicesShows the diversity and number of revenue streams the firm hasTells us what kind of customers the firm deals with

Example SingTelOffers telecommunications service, cable TV and broadband internet serviceControls Optus from Australia Services customers from different regions with different needs

Industry and Competitive AnalysisIndustry and Sector OutlookNeed to analyse the overall trend of the industry (Growing or Sunset industry)Eg. Renewable Energy vs Diesel DistributionRelates to Thematic Investing

Industry and Sector OutlookUnderstand important events pertaining to the industryEg. New patents (Pharmaceuticals), New innovations (Film vs Digital), Regulations (Finance Industry)

Why so important?Gives indication of future growth potential of the industryUnderstand how sensitive the industry is to macro factors

CompetitorsMarket Structure of the industryHighly Competitive or MonopolisticLocal, Regional or International CompetitionTells us the stability of firms profits with respect to the actions of competitorsEg. (Samsung vs Apple)

Economic and Thematic PlaysGeo Political OutlookChange in Policies/Policy StanceChange in LeadershipPolitical and Military AntagonismAdds uncertainty to the profitability of firms in the region in questionEg. China vs Japan, North Korea antagonism

An Example SGX AcquisitionSGX acquisition effort of ASXAustralian regulators were reluctant to accept SGXs offer due to sensitive control issuesSGX did not manage to buy over the large revenue stream of ASX

Economic Indicators

IndicatorsWhat it meansGDPBroadest Economic IndicatorOverall Economic Performance of the CountryJob GrowthIndicator of Consumer ConfidenceInfer that Consumer Spending will increase with Job GrowthPMIMade up of 5 sub indicatorsTells us Investors Confidence in the economy50 is the magic number

Thematic InvestingInvesting by identifying global trends and drivers of businesses

Consider the Current ThemesBy no means exhaustiveChinas transition from investment driven growth to consumer driven growthClean and Sustainable EnergyQuantitative EasingEuropean RecoveryThe Big Picture

What does it all mean to youPriced InHow do we know information is already factored into the priceEfficient market HypothesisDetermine by looking at charts (Any sharp movements in prices?)

An Example SC Global

What does this all mean to an InvestorNo fixed investment philosophyDetermine which kind of information is best for making your judgement

Q & A