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Fire Your Stock Analyst!: Analyzing Stocks On Your Own, Safari, 2nd Edition

By Harry Domash

Published by FT Press

Published Date: Nov 5, 2009

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Description

The #1 Guide to Do-It-Yourself Stock Analysis–Now Fully Updated with Powerful New Shortcuts!

 

“Harry’s book is among my most recommended readings because it provides a step-by-step process that enables any investor to analyze potential investment opportunities and ultimately become a much better investor.”

– Charles E. Kirk, The Kirk Report

 

“This is a thoughtful book that will stir the imagination and whet the appetite of anyone considering investing in stocks. It will serve as a foundation for lifelong education in how to improve your wealth.”

– Victor Niederhoffer, Chief Speculator, Manchester Investments, and author of the best-selling Education of a Speculator

 

“This book is sensible, balances risks with rewards, has a lot of real-world practical examples carefully worked out, and a lot of tangible parameters. This is the book I wish I had time to write.”

– David Edwards, President, Heron Capital Management, Inc.

 

“Fire Your Stock Analyst! grabbed my attention early and held it to the very end. This is a good book if you are interested in being your own stock guru or just getting started in common stock investment analysis.”

– Nicholas D. Gerber, Portfolio Manager, Ameristock Funds

 

“A refreshing antidote to run-of-the-mill investing ‘how-tos.’ The net result is an insightful and useful treatise on investing that works for both growth and value plays.”

– Charles Mulford, Invesco Chair and Professor of Accounting, Georgia Institute of Technology, and coauthor of The Financial Numbers Game: Detecting Creative Accounting Practices

 

“Fire Your Stock Analyst! offers honest and up-to-the minute advice and guidance on the investment-research process. Domash offers up a great combination of textbook knowledge backed by real-world examples.”

– Richard H. Driehaus, Driehaus Capital Management, Inc.

 

“Fire Your Stock Analyst! provides well-thought-out, sensible, step-by-step strategies for analyzing stocks, including when to sell. These analytical methods, used by pros though rarely explained to individual investors, will help you improve your results in the market right away.”

Jon D. Markman, Senior Investment Strategist and Portfolio Manager, Pinnacle Investment Advisors

Table of Contents

Acknowledgments . . . xiii

About the Author . . . xxii

Introduction . . . xxiii

PART I GETTING STARTED . . . 1

Chapter 1 The Analysis Process . . . 3

Identifying Potential Candidates . . . 3

Concentrate on the Strongest Candidates . . . 4

Quick Prequalify . . . 4

Detailed Analysis . . . 6

When to Sell . . . 10

Summary . . . 10

Chapter 2 Evaluating Risk . . . 11

Portfolio Risk . . . 11

Risk Factors . . . 12

Spotting Strong Industries in a Weak Market . . . 16

Company-Specific Risks . . . 17

Company-Specific Risks Described in Subsequent Chapters . . . 20

Summary . . . 23

Chapter 3 Screening . . . 25

Morningstar . . . 26

Google . . . 26

Zacks . . . 27

Portfolio123 . . . 27

Google Growth Screen . . . 28

Zacks Growth/Momentum Screen . . . 31

Portfolio123 Down & Out Value Stock Finder . . . 34

Portfolio123 Growth Stock Screen . . . 38

Zacks’ Bulletproof Stocks . . . 41

The Zen of Screening . . . 44

Premade Screens . . . 44

Summary . . . 45

PART II ANALYSIS TOOLS . . . 47

Chapter 4 Analysis Tool #1: Analyze Analysts’ Data . . . 49

Who Are the Analysts? . . . 50

Analysts’ Ratings . . . 51

“Sell” Is a Four-Letter Word . . . 51

Consensus Ratings . . . 53

Do Strong Buys Outperform Sells? . . . 54

Number of Analysts . . . 58

Sentiment Index . . . 59

Analysts’ Estimates . . . 61

Earnings Surprise . . . 66

Sales Forecasts . . . 67

Guidance Changes . . . 69

Research Reports . . . 69

Summary . . . 70

Chapter 5 Analysis Tool #2: Valuation . . . 71

Implied Growth . . . 72

Growth at a Reasonable Price . . . 76

Dividends . . . 80

Summary . . . 80

Chapter 6 Analysis Tool #3: Establish Target Prices . . . 81

The Process . . . 82

Summary . . . 90

Chapter 7 Analysis Tool #4: Industry Analysis . . . 91

The Business . . . 91

Industry Growth Outlook . . . 92

Analysts’ Forecasts Are Good Enough . . . 93

Convert Earnings Growth to Sales Growth . . . 93

Industry Concentration . . . 96

Picking Winners in an Emerging Fragmented Industry . . . 97

Industry Scuttlebutt . . . 101

Summary . . . 102

Chapter 8 Analysis Tool #5: Business Plan Analysis . . . 103

Introduction . . . 104

Overblown Competitive Advantages: Factors That Should Make a Difference But Often Don’t . . . 113

Business Plan Scorecard . . . 115

Summary . . . 115

Chapter 9 Analysis Tool #6: Evaluate Management Quality . . . 117

Key Executive and Board Quality . . . 117

Clean Accounting . . . 118

Earnings Growth Stability . . . 120

Stock Ownership . . . 122

Summary . . . 122

Chapter 10 Analysis Tool #7: Analyze Financial Fitness . . . 123

Financial Fitness Counts . . . 123

Pinpointing Financially Challenged Companies . . . 124

Simplify the Problem . . . 125

Detecting Potential Busted Cash Burners . . . 27

Detailed Fiscal Fitness Exam . . . 136

Bond Ratings . . . 150

Use Bond Prices to Identify Risky Debtors . . . 152

Summary . . . 153

Chapter 11 Analysis Tool #8: Profitability and Growth Analysis . . . 155

Where Do Earnings Come From? . . . 155

Analyzing Sales (Revenue) History . . . 161

Analyzing Margins . . . 166

Comparing Margins . . . 167

High Versus Low Margins . . . 172

Analyzing Overhead Expenses . . . 174

Profitability Ratios . . . 175

Cash Flow Analysis . . . 182

EBITDA Versus Operating Cash Flow . . . 189

Summary . . . 190

Chapter 12 Analysis Tool #9: Detect Red Flags . . . 191

Sales Growth Trends . . . 193

Accounts Receivables and Inventories . . . 197

Statement of Cash Flows . . . 204

Yellow Flags . . . 209

Summary . . . 212

Chapter 13 Analysis Tool #10: Ownership Considerations . . . 215

Institutional Ownership . . . 215

Insider Ownership . . . 218

Summary . . . 221

Chapter 14 Analysis Tool #11: Price Charts . . . 223

Trends . . . 223

Moving Averages . . . 225

Value Investors . . . 225

Growth Investors . . . 226

Avoid Downtrends . . . 227

Compare Short- and Long-Term Moving Averages . . . 227

The Risk Zone . . . 228

Chart Types . . . 229

Trading Volume . . . 230

Summary . . . 230

PART III THE ANALYSIS PROCESS . . . 231

Chapter 15 Quick Prequalify . . . 233

Concentrate on the Strongest Candidates . . . 233

Company Overview . . . 234

Valuation Ratios . . . 238

Real Revenues + Real Earnings + Real Growth = Real Stock . . . 241

Check the Buzz . . . 243

Summary . . . 244

Chapter 16 The Value Investing Process . . . 245

Concentrate on the Strongest Candidates . . . 245

Cycles . . . 247

Normalizing . . . 248

The Value Analysis Process . . . 248

When to Sell . . . 271

Summary . . . 273

Chapter 17 The Growth Investing Process . . . 275

Concentrate on the Strongest Candidates . . . 275

Growth Candidates . . . 278

The Process . . . 278

When to Sell . . . 315

Summary . . . 317

Chapter 18 Analysis Scorecards . . . 319

Value Stock Analysis Scorecard . . . 320

Growth Stock Analysis Scorecard . . . 326

PART IV APPENDIXES . . . 333

Appendix A Industry Information . . . 335

Appendix B Economic Data . . . 341

Appendix C Earnings Reports and Conference Calls . . . 343

Reported Earnings . . . 344

Summary . . . 346

Appendix D Detecting Scams, Frauds, and Pump and Dump . . . 347

Summary . . . 350

Appendix E How to Read Financial Statements . . . 351

Income Statement . . . 352

Balance Sheet . . . 353

Statement of Cash Flows . . . 355

Finding the Data . . . 357

Pro Forma Accounting Versus GAAP . . . 358

Appendix F Glossary . . . 359

Index . . . 367

Purchase Info

ISBN-10: 0-13-704025-3

ISBN-13: 978-0-13-704025-4

Format: Safari PTG

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