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13 Cards in this Set
- Front
- Back
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5 stages of business cycle (and attractive investments)
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Recovery - cyclicals, commodities
early expansion - Stocks, real estate late expansion - bonds, interest sensitive investments slowing, entering recession - bonds, interest sensitive investments recession - stocks, commodities |
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Concentration ratio
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Simply add market share % of the N firms in question
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Herfindahl index
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sum of the squared market share % of N firms in industry
HI < .1 - loosly concentrated industry .1<HI<.18 - some industry concentration .18<HI - highly concentrated industry |
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Porters 5 factors that determine industry competition
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1. Rivalry among competitors (many similar sized firms = greatest rivalry)
2. Threat of new entrants 3. Threat of substitute products 4. Bargaining power of buyers 5. Bargaining power of suppliers |
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Growth company
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Consistantly capable of selecting project that generate returns greater than their WACC. They have above average investment opportunities
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Growth Stock
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Earns higher return that those of equivalent risk. occurs when Intrinsic value > maret value
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Defensive company
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Earnings are insensitive to market downturns (ie utilities and grocery stores)
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Defensive stock
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Low beta stocks whose returns do not decline as much during overall market declines. They have low correlation (beta) with market returns
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Cyclical company
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Returns highly correlated with the business cycle. Usually have high level of fixed costs
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Cyclical stock
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Rates of return are typically more exagerated than those of the market. These stocks have beta greater than 1.
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Speculative company
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Assets are very risky but have potential to generate enourmous return.
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Speculative stock
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Highly likely to have very low or negative return but slight probability of enourmous return.
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Expected EPS
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=[Sales(EBITDA%)-depreciation-interest](1-t)
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