Fundamental analysis

economists arises in determining what it is ‘all relevant information’ and thus which information is fundamental. As ‘fundamental’ seems ambiguous, different researchers may reach different conclusions by simply considering different information as fundamental. This implies, that for the EMH to be efficient, a model is required to provide benchmark criteria. Otherwise, this hypothesis is considered to be incomplete. The economists distinguish between three degrees of the EMH. The weak form efficiency implies that current stock prices do not reflect the past prices, therefore obtaining past information is of no value. Simultaneously, it means that future prices cannot be predicted by using current prices causing investors being unable to beat the market. This is closely related to the Random Walk Hypothesis, which states that there are no patterns to returns and hence the returns cannot be predicted. As the prices always react to new information and new information is random, it is possible to claim that the price changes are random as well (Malkiel (2003), p.59). The weak efficiency form can be easily tested as there are a lot of money managers who rely on technical analysis when observing the stock prices. Technical analysis is the use of charts and trading rules based on past performance and volume. The empirical evidence supports the EMH as it shows that returns from technical analysis do not yield abnormal returns or exceed a buy and hold strategy (Market Technician’s…

provided more tempting opportunities. Ultimately, DFA’s bet to stick with its overall small cap/value strategy, proved to be the right move. By sticking with that strategy during the tech run-up, the company was able to avoid the pain that tech and growth investors experienced in the subsequent downturn. DFA’s value funds had tremendous returns, justifying the faith of its long-term investors and solidifying DFA’s grip on the loyalty of its clients. The poor performance could be explained by…

Brav, Jiang, Partnoy, and Thomas seek to answer the two questions below in their analysis using an updated empirical analysis from an extended sample of 11,602 13D filings that covers US activist events from 2001 – 2007: 1. What is the nature of activist hedge funds’ intervention in target firms? and 2. Does hedge fund activism create value for shareholders in the target firms and investors in the hedge funds? The authors note that activist hedge funds tend to target “value” firms that have low…

BEV is an acronym for business, economic and valuation model. It is a proprietary quantitative and qualitative equity investment system based on 20 years of research and development. Buy, hold and sell decisions are based on a formula that scores the stock valuation in relationship to the company 's business fundamentals and economics. The system employs, generally, a passive buy-and-hold strategy with minimal re-balancing activity. A stock may be replaced once every 1 to 5 years. Although the…

The theory behind this approach is that similar corporations should have similar valuations. Firstly, for the purpose of this report, it is important to select a few companies that have similar operational performance and financial status as CIMIC Group, in detail, companies selected should be of the same size, bear similar risks and have the same capital structure as CIMIC group. Secondly, choose appropriate multiples and pros and cons of each multiple should be weighted (Meitner 2006). Key…

The most popular and father of all models in asset pricing (CAPM) from Sharpe (1964) and Lintner (1965a) was developed independently of each other using the portfolio theory to deduce a market equilibrium. Portfolio theory with a riskless asset and unlimited short sales was the basis for this model (Krause, 2001). To add to the charateristics of accumulating portfolio theory to ascertain the market stability, it also considers the decision of a sole investor. Given the price Sharpe (1964) and…

Additionally, information was provided about DUK and its competitor NEE within the scope of DuPont analysis. Based on the information presented within this document, the recommendation would be to purchase DUK. While the P/E forward trend and the Dividends-and-Earnings methods presented differing results, DUK is still a good buy because it has historically paid dividends and provided growth each year. It is not unreasonable to assume growth will continue, however, the actual rate of…

Intel and AMD are two companies that operate in the semiconductor industry. Although they are in the same industry they are very different in terms of market capitalization with Intel being valued at $149.55 billion and AMD being valued at $3.80 billion. The differences are also showcased in their stock returns. Intel’s average annual three-year return is 9% while AMD’s is 2%. Therefore, Intel has produced a higher return for their investors over the previous three years. But when comparing…

Growth stocks and value stocks are both good investments. However, knowing the nuances of each type of stock and when is the optimum time to invest in each is the key to having a sound investment strategy and maximum return for the investor. Growth stocks are usually characterized by strong growth rates, in current, prior and future periods. Growth stocks a can be defined as the stock of a company which is growing earnings and/or revenues faster than the industry or the overall market.…

Lakonishok and Ritter 1992). On the contrary, the behaviourists focus on the investors’ irrational behaviour and limited arbitrage opportunities in relation to stock market anomalies. The behavioural models attempt to explain the market anomalies using the judgement biases of investors that lead to the occurrence of over-reaction and under-reaction effect. De Bondt and Thaler (1985) have provided the evidence that the investors are irrational, overreacting to recent news and underreacting to…