Practical Personal Investing 2
This course will give you an unbiased, non-promotional view of
financial markets and investments. You will learn how to analyze,
find, and manage investments using fundamental and technical
analysis.
You will discover the difference between value and growth
stocks, and the meaning of oversold and overbought conditions.
You will use free websites, different criteria and indicators to
analyze stocks. You will gain the required knowledge to make
better investment decisions and have the opportunity to ask
questions and participate in discussions.
Online access is essential. While this course is a continuation of those offered in the winter and fall of
2014, it is open to anyone with an interest in investing in stock markets. Attendance at the previous
courses is not necessary.
Moderator: Greg Shtock
Over 20 years ago, while working full time as an engineer, Greg Shtock undertook the task of
managing his own finances, studying markets and investment methods. He investigated which
strategies work and which don’t, and, most importantly, why. Today, he shares his experience and
passion with others by teaching how markets work.
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To download this presentation go to Investors Support Network:
http://investorssupportnetwork.com/practical-personal-investing-2/
PPI 2 – Course Outline
 Stocks value based on their EPS and P/E multiples
 Value vs. Growth Stocks
 GARP - 'Growth at a Reasonable Price
 PEG Ratio
 P/S – Price to sales ratio
 REIT - Real Estate Investment Trust valuation using AFFO criteria
 Dividend Yield – Payout Ratio
 Price to Book and Price to Cash Flow Ratio
 Investment Methodology – CAN SLIM, by William O’Neil
 Technical Analysis Demystified
 Trend, Chart Patterns, Candle Stick Charts
 Relative Strength Index – RSI
 Overbought / Oversold Conditions
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Introduction
Before we begin our presentation, let me show you some of the practical investment
tools we will use. Do not worry if they appear to be somewhat complex. This course is
designed for beginners and will be presented in simple language.
Free tools:
Yahoo Finance – News and fundamentals: http://finance.yahoo.com/
Finviz.com – Stocks Screener, Futures, Forex : http://finviz.com/futures.ashx
Stockcharts.com – Charts and technical analysis: http://stockcharts.com/
FreeStockCharts.com : http://www.freestockcharts.com/platform/v1
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Video, Stocks Markets: https://www.youtube.com/watch?v=ejjNMnIo3Fg
Finding great companies is only half the equation in
picking stocks.
Figuring out an appropriate price to pay is just as
important to your investment success.
A great company might not be a great investment, if
its stock is too expensive.
Likewise, a company of mediocre quality could be a
good investment, if bought cheaply enough. Either
way, it's critical to be aware of the prices you are
paying for your stock investments.
Source:
http://news.morningstar.com/classroom2/course.asp?docId=145096&page=6&CN=
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Expensive or Cheap Stocks?
Price
Apple Inc
AAPL
116
Facebook, Inc.
FB
92
Twitter, Inc
twtr
26
Google Inc.
googl
654
Microsoft Corporation
msft
43
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 Let’s start with the basics.
 Is a $10 stock of company A less expensive than a $20 stock of
company B? The answer is not so obvious.
 When you buy a company’s stock, you gain partial ownership of
the company.
 What would you look for when buying a business?
 You would look at sales and revenue and many other factors.
However, do higher sales guarantee a successful business?
 What about expenses relative to sales?
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Profitability is one of the most important factors in evaluating companies.
In the financial world, company profitability is measured by earnings.
Earnings typically refer to net income, after taxes and all expenses.
So, is company A with its $2 million dollar earnings better than company B with only $1M earnings?
Again, the answer is not so obvious.
What if company A has four million outstanding shares? This means that its earnings per share are
$0.50.
If company B has only ½ million outstanding shares, the earnings per share would be $2.00.
In this case, when you buy shares from company A, company B is actually more profitable ($2.00 vs.
$0.50), even with less earnings.
Definition of Earnings per share (EPS):
A company's profit divided by its number of common outstanding shares.
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 The next question you may ask is: How much are you ready to pay for a share in the
company?
 It depends on what you will get back for your investment. Company B’s stock would be
worth more because it has an EPS of $2.00 vs. the EPS of $0.50 of company A.
 In order to compare “apples to apples,” investors use the Price-to-Earnings Ratio.
 Definition of Price-to-Earnings Ratio (P/E): The price per share is divided by the annual
earnings per share.
 In financial jargon, P/E is also called “the multiple”.
Company A
Company B
Price
$10
$20
Earnings
$2M
$1M
Outstanding Shares
4M
0.5M
EPS
$0.50
$2.00
PE Ratio
20
10
Conclusion: Based on the PE ratio, the $20 stock of company B is less expensive or has
more value than the $10 stock of company A .
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Price
EPS
PE
Apple Inc
AAPL
116
8.65
13
Facebook, Inc.
FB
92
0.98
93
Twitter, Inc
twtr
26
-0.95
-
Google Inc.
googl
654
21.22
30
Microsoft Corporation
msft
43
1.48
30
Concepts of Value vs. Growth Stocks
Value investing is buying stocks at less than their intrinsic value. One of the characteristics of value
stocks is Low PE ratio.
Definition of 'Growth Stock‘: Shares in a company whose earnings are expected to grow at an aboveaverage rate relative to the market. Source: http://www.investopedia.com/terms/g/growthstock.asp
Growth stocks, typically have High PE Ratio.
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Markets PE ratio:
http://online.wsj.com/mdc/public/page/2_3021-peyield.html
http://www.advisorperspectives.com/dshort/updates/PE-Ratios-and-Market-Valuation.php
http://www.multpl.com/
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