Charles R. Blyth Fund
Stanford’s Premier Investing Group
STOCK ANALYSIS 101
Who are we?
• Student-led investing group on campus
• Manage $140k portfolio of mostly stocks
• Focus on teaching students investing through
hands-on valuation
• Meetings MW 5:15-6:15PM Wallenberg 120
STOCK ANALYSIS 101
3/22/2016
Training Session Plan
• Goal: Although you are in a trading
competition, you need to build your
fundamental investing skills before your
technical skills
• Session 1: Stock analysis basics
• Session 2: Ratio analysis
• Session 3: Technical analysis
STOCK ANALYSIS 101
3/22/2016
Key Takeaways
• How do I research a stock?
• What qualitative factors do I need to consider?
• What quantitative factors do I need to
consider?
STOCK ANALYSIS 101
3/22/2016
How do I research a stock?
How do I research a stock?
• Start with the Annual Report (10K)
• Google Finance, Yahoo! Finance, Wall Street
Journal
• Investopedia
• Let’s now show you how to navigate these
resources
STOCK ANALYSIS 101
3/22/2016
How do I pick a good stock?
• Fundamental Analysis
– Qualitative Questions
– Quantitative Questions / Financial Statements
• Technical Analysis
– Charts, graphs
– Recent News
STOCK ANALYSIS 101
3/22/2016
What qualitative factors do I
need to consider?
Qualitative Questions
– Does the company have significant competitive
advantages/barriers of entry?
– How has the company performed historically?
– What risks are involved in investing in the
company?
– How much debt does the company carry?
– Are they making lots of money?
– Where does the company’s money go?
STOCK ANALYSIS 101
3/22/2016
Qualitative Factors
• Business Model – How does the company make
money?
• Competitive Advantages – What makes the
company unique? Barriers of entry?
• Risk Factors
• Management
STOCK ANALYSIS 101
3/22/2016
What quantitative factors do I
need to consider?
Quantitative Analysis
• Part I: What do the financial statements say?
• Part II: What do its financial ratios say?
• Part III: How can charts & technical analysis
help me trade better?
• Part IV (Advanced): How much is this company
truly worth?
• Note: Today we will only be focused on Part I.
STOCK ANALYSIS 101
3/22/2016
Financial Statements
• On Google Finance or Annual Report (10K)
• Three Main Statements
– Income Statement
– Cash Flow Statement
– Balance Sheet
STOCK ANALYSIS 101
3/22/2016
Income Statement
BASIC FORM
Revenues / Sales
Less: Expenses
-----Net Income
DETAILED FORM
Revenues / Sales
Less: Cost of Goods Sold
-----Gross Profit
Less: Sales, General, Administrative
Less: Utilities, Salary, Rent & Other Expenses
-----Operating Income
Less: Interest Payments on Debt
Less: Tax Payments
-----Net Income
STOCK ANALYSIS 101
3/22/2016
Cash Flow Statement
BASIC FORM
Add: Cash Flow from Operations
Add: Cash Flow from Investing
Add: Cash Flow from Financing
Beginning Balance Cash
Add: Increase / Decrease in Cash
Ending Balance Cash
STOCK ANALYSIS 101
3/22/2016
DETAILED FORM
Cash Flow From Operations
Add: Net Income
Add: Depreciation & Amortization
Add: Increases in Liabilities
Less: Increases in Assets
Cash Flow From Investing
Purchase of Property, Plant, Equipment
Sale of Property, Plant, Equipment
Cash Flow From Financing
Add: Issuance of Stock
Add: Issuance of Debt
Less: Dividend Payments
Beginning Balance Cash
Add: Increase / Decrease in Cash
Ending STOCK
Balance
Cash101
ANALYSIS
3/22/2016
Balance Sheet
BASIC EQUATION
ASSETS = LIABILITIES + SHAREHOLDER EQUITY
DETAILED FORM
Assets
Cash
Accounts Receivable
Inventory
Liabilities
Debt
Accounts Payable
Shareholder Equity
Common Stock
Retained Earnings
STOCK ANALYSIS 101
3/22/2016
Now what do I do?
• Run through company’s statements line by line and
figure out:
– What are the trends?
– Why are there such trends?
• Income Statement Questions
– Has the company consistently been turning a profit?
– What are its sources of revenue / expenses?
• Cash Flow Statement Questions
– Has the company consistently been making cash?
• Balance Sheet Questions
– Does it have enough assets to cover its debts?
STOCK ANALYSIS 101
3/22/2016
Why are these useful?
• Foundation for understanding how much a
company is worth
• Used for ratio analysis and other “fair value”
analysis
• Not used for technical analysis
STOCK ANALYSIS 101
3/22/2016
Key Takeaways
• How do I research a stock?
– Annual Report, Google Finance, Investopedia
• What are qualitative factors I need to
consider?
– Business Model, Competitive Advantage, Growth
• What are quantitative factors I need to
consider?
– Financial Statement Trends
STOCK ANALYSIS 101
3/22/2016
Action Items
• Pick a company that you like in an industry that
you’re interested in
• Read the company’s Annual Report (10K)
• Look through the company’s financial
statements on Google Finance and see if you
can identify trends
STOCK ANALYSIS 101
3/22/2016