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TranceAddict Investors Club @ Marketocracy (pg. 73)
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| mndeg |
yeah but it generally stays around a number. how was that number calculated? Who is to say a 0 gross margin is worth a -5% drop in the price of stock or -10%?
there's gotta be some type of excel worksheet that is able to find the general fair value of the stock given the forecast and results or else everyone is just guessing
and MER reported -5.0 EPS after hours instead of -2.0 EPS and was positive the next day. |
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| Krypton |
It's my belief the markets are inefficient, so all i can say about price reactions to earnings reports is that they are irrational. No one decides the price. It's generally unpredictable beyond saying if they beat earning estimates, the price goes up, and if not, it goes down.
One excel formula I use with EPS metrics is..
PE x EPS = P
Maybe that'll help you?
In a few minutes I'm going to post the best stocks I could possibly find, which are underpriced by the market. Finally, after a couple months... |
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| Krypton |
Here it is. The 11 best stocks I could possible find which are substantially underpriced by the market. I call this my Gamma Quantitative Portfolio. Allocations are given. All 11 stocks are STRONG BUYS. The intrinsic value is what I think the stock is worth. The current price (as of Friday, July 18, 2008) is next to it. The % discount is how discounted I think the stock is. So a 50% discount is like going to the mall and buying your favorite clothes at 50% off, knowing the store is going to raise the price back to retail anytime. Gamma is a metric I developed in which all stocks with a gamma higher than 1 are underpriced, while stocks with gammas lower than 1 are overpriced. So without further ado...
The strategy employed is a concentrated buy-n-hold strategy. I want my turnover rate to be less than 20%. I want as few stocks as possible because I believe that the less stocks in a portfolio, the higher the potential returns. Risk is mitigated because the stocks within the portfolio are all high quality, and are steeply discounted by the market. I count on the probability of upside capital appreciation to be much higher, which is the mitigating force of risk caused by non-diversification.
Look at all these stock's price charts. Notice how they are all in a dip. This confirms my calculations of market discounted stock prices. |
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| Krypton |
You guys probably want to know what my algorithm looks like. Here are some screenshots..
INPUT
This is the page where all the data needed is inputted into the model. Algorithm textbooks call these "independent variables". Though many are not independent, but in this case, they technically are.
CALCULATIONS
This is where the financial calculations are made. Algorithm textbooks call these "dependent variables".
ALGORITHM RATIOS
This is where the financial calculations are compared to a benchmark average (Dow Jones Industrial Average). More dependent variables.
ALGORITHM TALLY
Each algorithm ratio is assigned a 1 or 0 based on whether that ratio beats the market average. 1 for a market-beating ratio, 0 for a market-losing ratio.
OUTPUTS
This is where the results of the entire algorithm model are displayed. It recommends a percentage grade, rating, recommendation, and even an approximate valuation based on the gamma metric. Once I have the best possible companies with the best possible valuations, I then do a qualitative analysis. This model is strictly quantitative, but it still forms the basis of all my stock picks.
Now, you may be wondering, how do I estimate intrinsic values. In other words, how do I calculate the "true value" of the company. Here is my intrinsic value model. It's pretty large, so I use two screenshots so you can see most of it...
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| Capitalizt |
Your algorithm is too damn complicated for me ;)
Though I am really interested now in AUO, HIMX, and GLW. They are in the only industries I understand fairly well, and look like killer long term plays. I'm not sure how the oil/gas companies will do once the political situation changes with Obama next year, but technology is in a long term growth period. We are going to be needing more computers and more internet stuff regardless, and those three companies look well positioned for it.
Shakka, you're a fundamentals kinda guy, what do you think of those three? I'm seriously thinking of adding them to the IRA. |
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| Shakka |
| quote: | Originally posted by Capitalizt
Your algorithm is too damn complicated for me ;)
Though I am really interested now in AUO, HIMX, and GLW. They are in the only industries I understand fairly well, and look like killer long term plays. I'm not sure how the oil/gas companies will do once the political situation changes with Obama next year, but technology is in a long term growth period. We are going to be needing more computers and more internet stuff regardless, and those three companies look well positioned for it.
Shakka, you're a fundamentals kinda guy, what do you think of those three? I'm seriously thinking of adding them to the IRA. |
Like GLW long-term, particularly given they're early-stage "green" business in the diesel space. I'm held back by consumer issues and the high liklihood of a flat-panel TV glut and the potential negative pressure that could put on LCD glass prices (which account for almost all of GLW's profits). But again, I like their long-term prospects--they do some pretty cool stuff.
AUO--I think they just cut their forecast or missed, but I'd rank it below GLW (though I don't know it as well) b/c I think their glass exposure is more in smaller screens like monitors and notebooks. I'm not aware of any other up-and-coming technologies or products they're developing (lack of knowledge on my part). Also, GLW has some proprietary technologies which give them an element of differentiation in an otherwise near-commodity business.
HIMX--don't know it. If I had to pick one of the 3 long-term, I'd probably just stick with GLW--they're a best-of-breed company.
/2 cents. |
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| Capitalizt |
| GLW should benefit from fiber optics too shouldn't they? I know cable networks are big now, but 10-15 years from now, people are going to be demanding more speed, and fiber is the only thing that can beat cable for bandwidth.. |
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| Shakka |
| quote: | Originally posted by Capitalizt
GLW should benefit from fiber optics too shouldn't they? I know cable networks are big now, but 10-15 years from now, people are going to be demanding more speed, and fiber is the only thing that can beat cable for bandwidth.. |
Yes, it's just not been adding to profits for the last 7+ years because there was such a glut of dark fiber after the tech bust. Eventually it should become more meaningful. |
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| Moongoose |
| Krypton if you have time, could you run NVDA trough those algorithms of yours, to see if its worth putting any money into it. |
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| mndeg |
wow. financials are floating the market today even with poor earnings. a flashback to MER reporting. wachovia reported poor earnings and stock goes up. this is all going to come to a crash soon. the credibility of paulson is vaporizing fast.
all other sectors down. |
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| Swamper |
| quote: | Originally posted by Krypton
You guys probably want to know what my algorithm looks like. Here are some screenshots.. |
Nice work. Looks like you're a value investor ;)
I'm wondering, with your debt ratio figures, do you factor in the last few years/quarters and whether it's increasing/decreasing or do you just take the ratio most recent year/quarter? |
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