Slide financial invesment english (đầu tư tài chính)

Chapter 1. Overview of Investments Chapter 2. Equities investment Chapter 3. Bond investment Chapter 4. Derivative and others Chapter 5. Technical analysis Fundementals of investments: valuation and management, second edition, Charles J.Corrado and Bradford D.Jodan  Securities analysis, Benjamin Graham and David L. Dodd  The intelligent investor, Benjamin Graham  common stock and uncommon profits, Philip A. Fisher  How to make money in stocks, William J. O’Neil  The SnowBall  The Warren Buffett Way, Robert G. Hagstrom  Warren Buffett and George Soros, Mark Tier  The Tao of Warren Buffett, Mary Buffett and David Clark  Warren Buffett and interpretation of financial statement, Mary Buffett and David Clark  Rule 1, Phil Town  The theory of investment value, John Burr Williams

Phd Luu Thu Quang

Banking University of HCM

Study plan: link

Chapter 1 Overview of Investments

Chapter 2 Equities investment

Chapter 3 Bond investment

Chapter 4 Derivative and others

Chapter 5 Technical analysis

Reference books

and Bradford D.Jodan

Chapter 1: Overview of investments

1. Investment definition

2. Types of financial investment

3. Financial investment process

4. Methods of analysis

5. Investment methods

Investment definition

 According to Malkiel (2007), Investment is a method of buying assets to make a profit in the

form of reasonably predictable income (such as share dividends, bond dividends or rental income) and/or the value of the investment will increase later a long time (Random walk on Wall street)

“An investment operation is one which, upon thorough analysis, promise safety of principal and a satisfactory return” p54, Security Analysis, Benjamin Graham & David Dodd

“Investment, in finance, the purchase of a financial product or other item of value with an expectation of favorable future return In general terms, investment means the use money in the hope of making more money”, InvestorWords

Investment definition

 From the writer's perspective: Financial investment is a plan

whereby investors use idle funds to trade appropriate financial instruments, based on careful analysis, with a reasonable degree of risk tolerance to make a satisfactory profit in order to achieve your financial goals.

Why we need investment?

 Financial Freedom

 Take advantage of compound

interest

 Without investing your free

cash flow, you will be guilty

Mistakes in investment

 Realizing profits too early: This is a classic mistake when new investors realize

profit too hastily just to make a small profit Meanwhile, the momentum of market growth has just begun, the profits can still be greater and it is clear that new investors missed the big wave just because they were too impatient CNBC's advice is to be patient with the investments that are yielding profits before realizing profits Sometimes, big waves last for several years and not many investors have the patience to wait for this opportunity Quite simply, because many investors thought, "This stock has rallied so hard, it can't go up anymore.“

 "Fear" to cut losses: CNBC stated that this is the second classic mistake when

Mistakes in investment

 Herd effect: CNBC believes that new investors are often influenced by other

investors, or by market movements They mistakenly believe that if a stock is bought by more people, the quality of the stock is good The herd investment is often compared as gamble When making small profits from gambling, people often mistakenly make this profit too easily and start being affected by psychology Then suddenly, the player lost all their money and didn't understand what was going on.

 Listen to celebrities: It is not wrong to seek professional advice, but listening

them absolutely is not recommended CNBC believes that when a well-known investor publicly declares his or her remarks, it is not merely to the mutual benefit

of the market or to prove its worth Behind the public statements of investors always come with personal purposes, so be careful with statements like this.

Mistakes in investment

 Poor in time management: Investors should find important information about the

corporates as quickly as possible and should not be affected much from surrounding opinions time management is forgetting unnecessary information or un-useful elements The future is made by the decisions of current investors Therefore, worries about the past such as "should be like this and that" only waste time, but time means money.

 Forget your strengths: A common mistake that inexperienced investors often

make is making non-professional deals Some new investors have little success in the stock market, so they think they can make a profit with the real estate market,

Types of financial investment

 Equities: common stock and preferred stock

 Interest bearing instrument: money market instruments, fixed-income

4 Hedge Fund, ETF

5 Gold and Forex

6 Real estate

7 Commodities

Investment process

 Determine investment objectives: profits and risks

 Asset allocation

 Seeking about the law on investment

 Looking for investment opportunities

 Analysis of investment opportunities

 Market timing

 Disbursement

Investment process of VPO fund

investment method

 Fundamental analysis: handling economic information, information of the

business answer two questions

1 Answer the question why?

2 Good stocks or bad stocks?

 Technical analysis: working with prices and volumes and care about

1 Answer questions How?

2 Stocks increase and stocks decrease

Investment Strategies

 Value Investing Strategy

 Growth Investing Strategy

 Quantitative Analysis Strategy

 Growth at a reasonable price Strategy

 Income Investing Strategy

 Dogs of the Dow

 Strategy based on Technical Analysis (Trading)

 Strategy based on portfolio investment

Value Investing Strategy

Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value Value investors use financial analysis, don't follow the herd, and are long-term investors of quality companies

Low P/E

Pricing

Growth Investing

 DEFINITION of 'Growth Investing'

A strategy whereby an investor seeks out stocks with what they deemgood growth potential In most cases a growth stock is defined as a companywhose earnings are expected to grow at an above-average rate compared to itsindustry or the overall market

 INVESTOPEDIA EXPLAINS 'Growth Investing'

Growth investors often call growth investing a capital growth strategy,

Although it is often said that growth investing and value investing arediametrically opposed, a better way to view these two strategies is to consider

a quote by Warren Buffett: "growth and value investing are joined at the hip".Another very famous investor, Peter Lynch, pioneered a hybrid of growth andvalue investing with what is now commonly referred to as a "growth at a

 DEFINITION of 'Growth At A Reasonable Price - GARP'

An equity investment strategy that seeks to combine tenets of both growth investing and value investing to find individual stocks GARP investors look for companies that are showing consistent earnings growth above broad market levels (a tenet of growth investing ) while excluding companies that have very high valuations (value investing) The overarching goal is to avoid the extremes of either growth or value investing; this typically leads GARP investors to growth-oriented stocks with relatively low price/earnings (P/E) multiples in normal market conditions.

 INVESTOPEDIA EXPLAINS 'Growth At A Reasonable Price - GARP'

GARP investing was popularized by legendary Fidelity manager Peter Lynch While the style may not have rigid boundaries for including or excluding stocks, a fundamental metric that serves as a solid benchmark is the price/earnings growth (PEG) ratio The PEG shows the ratio between a company's P/E ratio (valuation) and its expected earnings growth rate over the next several years A GARP investor would seek out stocks that have a PEG of 1 or less , which shows that P/E ratios are in line with expected

Dogs of the Dow

 An article by H.G Schneider was published in the Journal of Finance in

1951 The investing strategy which focuses on Dogs of the Dow waspopularized by Michael Higgins in his book, "Beating the Dow" Thestrategy's simplicity is one of its most attractive attributes The Dogs ofthe Dow are the 10 of the 30 companies in the Dow Jones IndustrialAverage (DJIA) with the highest dividend yield In the Dogs of the Dowstrategy, the investor shuffles around his or her portfolio, adjusting it sothat it is always equally allocated in each of these 10 stocks

 Typically, such an investor would need to completely rid his or her

portfolio of about three to four stocks every year and replace them withdifferent ones The stocks are usually replaced because their dividendyields have fallen out of the top 10, or occasionally, because they havebeen removed from the DJIA altogether

 CANSLIM, created by Investor's Business Daily William J O'Neil, is a

system for selecting growth stocks using a combination of fundamentaland technical analysis techniques CAN SLIM is a bullish strategy for fastmarkets as the goal is to get into high-growth stocks before theinstitutional funds are fully invested

 C - Current quarterly earnings per share has increased sharply from the

same quarters' earnings reported in the prior year Generally investorsusing CANSLIM want EPS growth of over 20%, but the higher the better

 A - Annual earnings increases over the last five years Here again the

 S - Scarce supply coupled with strong demand for a stock creates excess demand

This is an environment in which stock prices can soar Companies acquiring ( purchasing ) their own stock reduces market supply and can indicate their

re-expectation of increased demand, along with insider confidence in the firm.

 L - Laggard stocks are preferred within the same industry Use the relative

strength index (RSI) as a guide The RSI ranges from zero to 100 A RSI

indication above 30 suggests a buying opportunity (bullish), while above 70

signifies a chance to sell (bearish).

 I - Pick stocks, which have institutional sponsorship by a few institutions with

recent above average performance For example, this could be a recently public company, still supported by a small handful of well known private equity firms

Be cautious of stocks that are over owned by institutions as you want to get in before the big money is fully invested.

Chapter 2: Equity investment

1. Economy analysis

2. Industry analysis

3. Company analysis

4. Stock valuation

Content limited in:

 The lecture only focuses on common stock analysis

 Students should research and expand the content of preferred stock

analysis

Equity investment

1 Buy a good / great company

"Buying a great company at a reasonable price is much better than buying a good company at a great price."

2 With cheap / reasonable price

3 Hold for a reasonable amount of time

Fundamental model

 Top-Down Model

 Bottom-Up Model

Top_down model

Application for organization: when the analyst focuses on the economy

and industry, if these two factors are not stable, they will not invest

Econo my

Industry

Bottom_up model

Application: prioritizing the search for under-value stocks; suitable for

individual investors

Econo my

Industry

Firm

The Purpose of economy analysis

 Supporting investors make decisions in allocating capital between

countries

 The distribution of investment instruments in each country

 Observing the advantages and disadvantages of the investment

environment in each country

 Find the industries that will benefit the most in the current and future

Investment environment

Investment environment is a combination of economic, social, cultural, legal, financial and infrastructure factors that directly or indirectly affect investors' investment activities.

Sharpe Ratio

Analysis the important macroeconomic

Policies and laws: monetary policy, fiscal policy, policies to attractinvestment capital, new legal documents

ICOR of Vietnam (2000-2015)

Source: Nguyễn Đức Thành, Phạm Văn Đại(2016), Báo cáo kinh tế thường niên 2016, Viện Nghiên cứu Kinh tế

Industry analysis objectives

Analytical objectives:

1 Choose suitable industries for investment

2 Understanding the situation of the industry and forecast the growth of these

industries in the future

Industry analysis objectives (cont)

Taken steps to achieve the goal:

Step 1 Select the industry for investment: based on two criteria

- The average growth rate of the industry compared to the growth rate of GDP:+ Industry classification

+ Statistics of industry growth (at least 5 years) and averaged by weight

+ Compare the average growth rate with the GDP growth rate forecasted above

and select industries with higher growth rates

- The compatibility of the industry with the current period of the economy:

Based on the sectors that have just been selected at the first criterion, weconsider and select the industries with adaptability and development in thecurrent economy stage

Industry analysis objectives (cont)

Step 2 Identifying the situation of the industry and forecast the growth of these industries in the future.

- Using Michael Porter model to analyze the situation of the industry

- Based on the analysis results from step 1, make a final prediction about the future growth of the industry.

Industry classification criteria

 Based on major systems such as: ISIC (UN), NAICS (USA), UK SIC

(UK), ICB (Dow Jones and FTSE), GICS (Morgan Stanley and Standard

& Poor's), VSIC 2007 (Vietnam)

 Based on the company's main business The main business activity is the

one that brings the main revenue for the company for a long time

ISIC: International Standard Industrial Classification

VSIC 2007

A NÔNG NGHIỆP, LÂM NGHIỆP VÀ THUỶ SẢN

B KHAI KHOÁNG

D SẢN XUẤT VÀ PHÂN PHỐI ĐIỆN, KHÍ ĐỐT, NƯỚC NÓNG, HƠI NƯỚC VÀ ĐIỀU HOÀ KHÔNG KHÍ

E CUNG CẤP NƯỚC; HOẠT ĐỘNG QUẢN LÝ VÀ XỬ LÝ RÁC THẢI, NƯỚC THẢI

F XÂY DỰNG

G BÁN BUÔN VÀ BÁN LẺ; SỬA CHỮA Ô TÔ, MÔ TÔ, XE MÁY VÀ XE CÓ ĐỘNG CƠ KHÁC

H VẬN TẢI KHO BÃI

I DỊCH VỤ LƯU TRÚ VÀ ĂN UỐNG

J THÔNG TIN VÀ TRUYỀN THÔNG

K HOẠT ĐỘNG TÀI CHÍNH, NGÂN HÀNG VÀ BẢO HIỂM

L HOẠT ĐỘNG KINH DOANH BẤT ĐỘNG SẢN

M HOẠT ĐỘNG CHUYÊN MÔN, KHOA HỌC VÀ CÔNG NGHỆ

N HOẠT ĐỘNG HÀNH CHÍNH VÀ DỊCH VỤ HỖ TRỢ

O HOẠT ĐỘNG CỦA ĐẢNG CỘNG SẢN, TỔ CHỨC CHÍNH TRỊ - XÃ HỘI, QUẢN LÝ NHÀ NƯỚC, AN NINH QUỐC PHÒNG; BẢO ĐẢM XÃ HỘI BẮT BUỘC

P GIÁO DỤC VÀ ĐÀO TẠO

Q Y TẾ VÀ HOẠT ĐỘNG TRỢ GIÚP XÃ HỘI

Industry classification at HOSE

 Principle

Industry analysis models

 Michael Porter model

 SWOT analysis

Industry analysis models

SWOT analysis for bún đậu mắm tôm

industry (Group discussion)

- Year of birth: 1947

- Michael Porter is a well-known professor in the field of competitive strategy; As an official professor of Harvard Business School; He has made positive contributions to America's business sector in particular, and the world in general.

Michael Porter

Michael E.Porter model

Analytical objectives

The goal of sector/industry analysis based on the MP model is to find out:

 Which factors effect on the level of competition of the industry?

 These factors as well as the influence of these factors on: Profits and

turnover of the industry; The development ability of the industry in thefuture

Threat of new entrants

a At present, the industry you are analyzing has any barriers to prevent othercompetitors from entering (note: It is not necessarily that an industry alwayshave barriers)?

b Is the ability to penetrate these barriers high or low?

c And how is their cost for penetrating in the industry you are analyzing?

d How do their penetration affect the revenue and profit of businesses in theindustry?

Michael E.Porter model

Bargaining power of buyers

a. Who are customers of the industry that you are analyzing?

b. What are the characteristics of these customers?

c. How does their pressure create on the industry?

d. How does this affect future revenues, profits, and growth of the

industry?