Equity Trading

Investing in Stocks & Fundamental AnalysisSelecting Stocks in 4 Steps Using Fundamental Analysis

Designing and implementing a system to evaluate real corporate value is absolutely crucial if you are a stock investor. Here are the four (4) steps that any investor should follow before buying any stock.

 

I) Evaluating the Industry

First of all, you must define the core industry of any company by determining factors such are:

1) Level of Competition (local & global)

2) Current Growth Rate & Forward Growth Rate

3) Expected Changes in the level of Technology

4) Industry Leaders

5) Recent Acquisitions

6) Future Industry Threats and Risks

7) Macroeconomic and Monetary Conditions

INVESTING & TRADING STOCKS AND INDICES

Stock investing means gathering fundamental information and choosing stocks by analyzing them. Equity traders have access to thousands of stocks and indices from all around the globe.

Equity Investing

Technical analysis is always important but the key to equity trading is fundamental analysis.

TradingCenter's outside-in investing model

Outside-in investing means beginning by analyzing the economy and the general industry and then move to individual corporate analysis. Our system can be implemented in five steps:

(i) Macroeconomic Landscape {identifying the stage of the macro-cycle}

(ii) Industry → Sector Analysis {technology, future growth rates, threats of substitutes}

(ii) Management Evaluation

(iii) Identifying the Corporate Strategy {Competitive advantage}

(iv) Balance Sheet

► Fundamental Analysis | ► Technical Analysis

 

Investment Valuation Methods

Been able to evaluate real value is very important towards making profitable stock-market investment decisions. These are the five most important stock evaluation methods:

1. Revenue Valuation

2. Earnings Valuation

3. Cash-Flow Valuation

4. Equity Valuation

5. Empirical-based Valuation

► More on Investment Valuation Methods

Peter Lynch's Secret Formula for Valuing a Stock's Growth

The Standard & Poor's 500 index includes 500 leading American companies listed on the NYSE or NASDAQ and captures 80% coverage of available market capitalization.

Ticker symbols: $SPX | ^GSPC | INX

The S&P 500 stock market index is based on the market capitalizations of 500 large American companies having common stock. S&P 500, introduced in 1923, as the ‘Composite Index’. On March 4, 1957, it expanded to its current 500 stocks basket. Today, it is one of the most traded equity indices in the world. The S&P 500 differs from other U.S. stock market indices, because of its weighting methodology.

S&P500 Calculation and Weighting

The S&P 500 has traditionally been a capitalization-weighted index. Since 2005, the index calculates the market capitalization of each company relevant to the S&P 500 using only the floating number of shares (shares available for public trading).

Table: Top 10 Shares by Index Weight in the S&P500

COMPANY

SYMBOL

INDUSTRY

Apple Inc.

AAPL

I.T.

Microsoft Corp

MSFT

I.T.

Amazon.com Inc

AMZN

Consumer

Facebook Inc A

FB

I.T.

Johnson & Johnson

JNJ

Health Care

Berkshire Hathaway B

BRK.B

Financial

JP Morgan Chase & Co

JPM

Financial

Exxon Mobil Corp

XOM

Energy

Alphabet Inc A

GOOGL

I.T.

Alphabet Inc C

GOOG

I.T.

Find the full list at Wikipedia: https://en.wikipedia.org/wiki/List_of_S%26P_500_companies

Dow Industrial is the most important index in the WorldThe Dow Jones Industrial Average

The Dow Jones Industrial Average (DJIA) is the most important and influential stock market index in the world. S&P 500 is in the second position, followed by the Nasdaq 100.

The Importance of Dow Jones when Backtesting Trading Strategies

Dow Jones is so important that if an equity-trading strategy doesn't work with Dow Jones, it can't work with any other index. Therefore, Dow Jones provides the ultimate framework for historical backtesting.

Short History of Dow Jones

Dow Jones Industrial follows the price changes of 30 US companies, and that is why it is often called Dow(30). Originally, Dow Jones Industrial was introduced in 1896 by Charles Dow. Earlier, in 1884, Charles Dow introduced the Dow Transportation Average, which is the oldest stock market index in the United States. The Dow Jones Industrial was originally used to measure the stock prices of industrial companies holding the largest reserves of raw materials. Later, the composition was expanded to include companies from more industries. From 1928 until nowadays, the composition of Dow Jones Industrial has changed 45 times. In 2009 General Motors and Citibank gave their place to Cisco and Travelers.

The Dow Divisor

The DJIA price consists of 30 stocks prices which are divided by a particular divisor. The Dow Divisor measures and excludes the effects of stock splits, reverse splits and other structural changes.

The 30 companies listed on the Dow Jones Industrial are traded either on the New York Exchange (NYSE) or on the NASDAQ.

The Dow Jones Indices Page

Which Companies Participate in The Dow Industrial

Here are the 30 companies that are included on the Dow 30 along with direct links to their official web-pages, symbols, date of original listing and current weighting on Dow Jones Industrial (last change 2011).

Hedge Funds Investing

The first hedge fund was created in the US during 1949 by Alfred W.Jones. Since then investing through a hedge fund has become very popular worldwide, especially during and after the 90s decade. Today, there are about 8,500 hedge funds in the world and their total assets are estimated at about 1.5 trillion USD.

 

Lipper Hedge Funds Composite Index

Hedge fund investors have historically enjoyed higher returns than the average investors of common stocks. This can be justified by comparing the historical performance of the Lipper Hedge Funds Composite Index, during the last 10 years, to the US popular Index S & P 500. The Lipper Hedge Funds Composite 'track' changes in the performance of a certain number of hedge funds.

What is Lipper at Wikipedia

Thomson Reuters

Funds of Funds Hedge FundsHedge Fund Managers & Management Fees

A hedge fund consists two roles: the manager (general partner) and the investors (limited partners). Actually, a manager can also be a limited partner, as he may invest his own money in the hedge fund. Usually, the manager of a hedge fund is a prominent person in the community with special skills and many contacts. The management fee paid is charged to investors (limited partners). Usually, the annuity fees are equal to 1% of the total assets of the hedge fund. Additionally, the management fee may include also a certain proportion of the Fund’s annual total profits.

About TradingCenter

TradingCenter provides essential information and tools for learning and trading the Global Financial Markets. TradingCenter helps investors to improve their skills and their level of understanding regarding core mechanisms of the trading process.

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