MATRIX CV - Compact Version
For fundamental research go to finviz.com Put stock ticker into search box on a top of page.
but remember that all accounting is flawed, especially since it's all Pro-Forma (or EBITDA - earnings before interest, depreciation, amortization) a fiction to make company look good on paper. They all publish GAAP alternative numbers (generally accepted accounting principals) but nobody ever looks at them. That picture is particularly depressing for most leading stocks now.
Still you should look at some numbers to better understand what you getting yourself involved in.
1. Market cap and Index inclusion
Two billion market cap (number of shares in a float times share price) is small these days. Largest stocks are in trillions and increasing. Extremistan in action.
If a stock is included into S&P500, its price action will be influenced by index a great deal, and maximum gains may be limited by its weighting. Out of index stock has much more freedom, but it still will be influenced by general market movement, and it may suffer from lack of liquidity and publicity (if you want to sell to a greater fool, he has to come from somewhere)
-note- If a small stock doubles, it will have near zero effect on market-wide index it belongs to. But if AMZN dips 10%, it will alone cause 0.25% loss in S&P500 and over 1% loss in industry specific fund.
2. Earnings, Sales, Dividend, People Working
The crux of accounting flaws is in ratios. Like popular P/E Ratio for example (Share Price by Earnings per share), about 20% on average. High PE indicates overvalued stock that may be too late for investment. Recently AMZN went from 970 PE to 120, while its share price increased fivefold. Mafs be hard, rofl.
All these ratios are a terrible guide for the future, but they can answer these questions about the present. Specifically:
Are there actual earnings? Unprofitable company is not a problem, but you need to understand what will drive it eventually to profitability and how long it will take. Or it may be an accounting gimmick, like UBER losing 2.5Bil on paper, while making 10Bil in real money. If there are no earnings, is there sales at least? Otherwise it's not a business - it's just an idea built on debt or sucker's money.
Dividend shows that there are real money flowing from company to shareholders (of whom many involved with company and use divi as income at lower tax rate). Divi makes it easier to sit in sideways stock, you get paid to wait. Some of the best performers don't pay any divi, they chose to reinvest profits into growth and reward shareholders thru share price increase.
Number of employees is a curious stat, sometimes it tells you alot about management. AMZN and WMT employ over a million people each, UPS is 500K. ETSY - 2 thousand something (surprising amount to run a pretty basic website). UBER got 20 thousand people in the office - staggering amount for an app that /supposedly/ does everything automatically. Guess artificial intelligence is not very artificial, it still requires alot of meat-ware.
3. Debt, Volume and Short Ratio
High level of debt is not always a problem, indeed some industries run them high as a rule (like Utilities XLU). High debt makes is harder for company to withstand downturns, many of them don't survive bear market because of this single problem. Stock with very high debt levels best not to be one of long term portfolio positions.
Most stocks trade millions of shares per day. This liquidity makes market tradable, so orders can be executed At Market and On Stop. If a stock trades less than 100K shares per day, I recommend using Limit Orders.
Short Ratio shows a percentage of free float that is held short (bet that stock will fall) and number of days it would take to cover. High SR is not always a problem, indeed when shorts get squeezed and start rapidly buy shares to cover, price will fly... for a while... But my point is this: shorting is pro's game, best to stay clear and let them duke it out, and not get caught in wild swings.
4. Earnings Date, Analyst following, Buzz, Insider trading
Check when company releases quarterly earnings. Best not to trade in front of it, because price may react in unexpected ways. Often, after big advance on strong earning release, stock will retrace some of the rise in following days/weeks. Often company reports bombastic numbers after prolonged uptrend on a chart, but stock ends lower that days, because "buy the rumor, sell the news". Often all the earnings day drama quickly forgotten and stock returns to its previous trend. All known and unknowable information gets absorbed into price - a bloodless verdict of The Market. Listen!
It is good when analysts follow, don't matter what they say. It is good when new analysts initiate, as well as some buzz from news and social nets - this is where new suckers are going to come from. After all, all this great commotion doesn't work if we don't manage to sell all this garbage to a grater fool for more money.
Insiders always sell. This is normal. When they buy in the open, for everyone to see, it's an unusual vote of confidence (or sometimes something else is going on).
5. Screener
while in FinViz, under the chart, under company name, click on industry this stock belongs to. FinViz uses slightly different sector breakdown, but gist is the same and it is very useful.
ETSY belongs to Internet Retail group. Sort Market Cap column from biggest to smallest to see where your stock is in pecking order. Note that biggest stock in a group (AMZN) is bigger than rest of them combined. See who the runners up. You can access these stocks info to compare if you wish, or go to Custom and use Settings to make FinViz display to you all these above outlined factors. It is not necessary at this stage imo.
While in group screener click on Charts to visually compare price action of your candidate against group leaders. ETSY is a strong performer.
All this helps but not material to making money in the markets. We get paid on price. Price is always right, opinions often wrong. There has to be more buyers than sellers (for whatever the reasons) for price to go up. This has to continue into the future, for us to sell all this crap to someone who thinks exactly the same thing. Price is the most important consideration of financial speculation and has to be observed carefully.
Go to StockCharts.com in Charts &Tools section, select Sharp Charts
Change settings as follows:
Daily, 1year; Candlesticks, Landscape; Volume off
check on: labels, color, smooth, y-axes, zoom
Keep SMA's, bur remove indicators.
Set top indicator to Volume, parameter 50, position below
Result is your Daily Trading Chart:
Change period to weekly and duration to 5 years and you have Weekly Investment Chart. Most of your analysis should be done on this chart
Things to consider in order to buy low and sell high:
Is your security in uptrend or downtrend? Visually, a succession of higher highs and higher lows is an uptrend and vice versa. Effort should be to buy the dip and sell the rip. If it's in downtrend, best not to rush, try to buy 2nd or 3rd panic low (big drop with huge volume or a hammer), or wait for a signs of turnaround.
Moving Averages are the great delineators. 200 Day MA and 50 Week MA are almost the same - about a year of looking back. Generally, above 200DMA = Bull; below 200DMA = Bear. 50 Day MA is very useful as trade trigger. 200 Weeks MA is only for historical background - it holds price memory way beyond free 5 year chart.
Price Movement needs to be analyzed for each individual trade candidate - percentages of what is possible, what happened before and probably will happen again. It's important to have realistic expectations for price and time. Support/resistance are the lines that meant to be broken. It would be useful to write down these observations into a diary, so you have some facts and figures to rely upon in a heat of the battle. Things get tricky after you buy...
STOP to stop the loses. Nobody bets with 100% wins. It's just not in the cards and can not be done. How do you know when you are wrong? How much are you willing to lose? When you can find these answers on a chart - life will become easier. Suddenly, there is a plan for every outcome, with vaguely defined parameters for gains and losses. It is better to be approximately right than precisely wrong. You don't have to buy all bottoms and sell all tops to do very well in markets. You just have to not lose all your money before you figure out what works for you. The winning trade, eventually but always, will have exactly the same problem - Why to Sell.
Watch Your Ideas. In the same Charts and Tools section of Stockcharts.com there is a CandleGlance Groups - a Watch List of 12 stocks. Set duration to 1year for watch, then switch to 2 months for trading when time comes. Let them come to you, be patient. When studying recent charts, keep in mind that past 2 years where very unusual in every sense.
You can look at the whole market thru the lens of these watchlists.
For example: all S&P Sectors and their performance in relation to S&P500
