INVESTMENT ANALYSIS

INVESTMENT ANALYSIS

Definition : defined as the process of evaluating

an investment for profitability and risk, ultimately has the purpose of measuring how the given investment is a good fit for a portfolio. 

INVESTMENT ANALYSIS METHOD

Investment Analysis Method

Fundamental Analysis

Technical Analysis

FUNDAMENTAL ANALYSIS

1. FUNDAMENTAL ANALYSIS

Definition The study of the stock value using basic data

such as earnings, sales and others. This basic state any securities have intrinsic

value. In equilibrium stock prices reflect the intrinsic value of the stock.

An investor who has a good fundamental knowledge can make a profit from the difference between the market price and intrinsic value to move quickly before the market price aligned with the correct information.

Fundamental

Analysisa)

Market / Economi

c Analysis

b) Industry Analysis

c) Compan

y Analysis

A) MARKET/ ECONOMIC ANALYSIS

This analysis will examine the general economic, with emphasis on variables that affect the economy of a country in a given period.

These variables can affect the aggregate economy and a significant impact on vested industry and company. Thus any developments that are likely to occur can affect the movement of share prices on the stock exchange.

B) INDUSTRY ANALYSIS

This analysis is known as sector analysis because it examines the industrial sector in a certain period.

In an analysis of industry needs to know the life cycle of industry analysis. The analysis must identify the period in which the company is located.

There are 4 stages in the industry life cycle.

i. Pioneer stage (innovation)

At this stage of rapid growth in demand occur, especially among the nature inovatif.

With the sales levels continue to increase with high growth rates. At this time there are also interesting opportunities outside the company to compete. Weak companies will be excluded at the outset. However, analysis are still having problems to identify companies that are able to survive in the industry.

ii. The development stage

At this stage is a high level of sales growth rate this time moderate.

The industry improve product quality and try to reduce prices. More stable market conditions and strong seta can attract more investors into the industry.

iii. Level Stability / Maturity Stage

This stage show is still high level of sales but a lower growth rate. All products and less innovative over standard among manufacturers. At this time there are many competitors in the market and cost are stable or nearly the same.

iv. Stage Fall

At this stage most of the companies suffered a decline in sales levels that cause the company's revenue also fell and may result in losses. Most companies out of the market. However, companies are still in the market are companies with loyal customers.

C) COMPANY ANALYSIS

Detailed analysis of the company made with the internal and external aspects.

To study the structure of the internal aspects of the organization of a particular company board of directors, key areas of business, subsidiaries, associated companies and business records.

Final objective of the analysis is to find the intrinsic value of the company. This intrinsic value is compared with the value of the stock market as a basis for making investment decisions.

Intrinsic value of the information derived from the financial statements of the company that provides financial data of the company.

Balance Sheet shows the position of the assets and liabilities of the company.

Statement of income to evaluate the performance of management and to estimate the future profitability of the company.

TECHNICAL ANALYSIS

2. TECHNICAL ANALYSISDefinition Technical analysis is a method of

evaluating securities by analyzing the statistics generated by market activity, such as past prices and volume.

Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.

DOW THEORY

Dow Theory was created by Charles H. Dow in 1921.

It concluded that the stock price in the market as a whole does not move at random but influenced by three cycles and price movements, namely: -

1. Primary Movement

Cyclical price movements for a few

years, that early - first year and at least

three years. It involves long periods of

time.

Usually the development of the rise is

longer than the development of the

decline.

Upward movement show the market

'bull' and downward movement show the

market 'bear‘.

ii. Secondary Movement

Cyclic secondary movement for several months,

that as early - first six weeks and at the latest of

six months.

It acts as a force to improve the deviation occurs

in the primary cycle.

It appears because of the correction in the

primary cycle of falling prices due to current

market prices lifted or when the market plunged.

iii.Small Movement/ Daily

Daily movement is occurring randomly.

It is cyclic for a few hours to a few days.

Cycle effect is not as felt by investors as

relatively short duration and of no

importance to the technical members in

making predictions.

TECHNICAL INDICATIONi. The Advance Decline Line

 Fluctuation line is the net difference between the number of

stocks experiencing price increases with the number of shares

of the price decline by subtracting the number of shares up to

the number of shares to come down in price.

These calculations are made using cumulative data. The

results obtained are plotted in order to form the line on a daily

or weekly basis.

These lines are compared with the average line to indicate

whether the stock market indicator movement is also

experienced by the market.

ii. Moving Average

Moving Average is calculated by determining the

number of such average closing price for 200

days, 30 weeks and so on.

The new calculation is made by adding one day

and the first to drop one day to the next. This

calculation is made over and over and the figures

are plotted to form the moving average line.

Moving average price compared to the market to

decide whether buying or selling.

iii. The New High Price Low

These market indicators could reflect either

bullish or bearish market.

Market is considered bullish if there is a number

of shares of a new show the highest price

significantly over 52 weeks.

Instead the market is weak if there are only a

few stocks only the highest price of a new show.

iv. Transaction volume 

These market indicators also reflect bullish or bearish market.

High transaction volume as a whole shows the market is

bullish. This condition is stronger if followed by an increase in

price.

v. Mutual Fund Liquidity

Market conditions have a direct relationship with this liquidity

ratio. The higher the liquidity ratio of the market is bullish.

High liquidity ratio shows potential purchasing power and its

stock price will rise.

On the other hand if the liquidity ratio is low potential

purchasing power also lower and its market will be fall.

vi. Others Technical Indication

Contrary Opinion

Short Interest Ratio

CHARTS1. Bar Charts

Prepared by plotting a bar chart of daily share prices over time. Every day stock price movements drawn vertically, the upper part shows the highest price, the bottom shows the lowest price, while a horizontal line marked showing the closing price. The underside of the bar chart shows the daily sales volume. Technical members to use a bar chart to see patterns and charts are used to forecast future price movements.

2. Point and Figure Charts

The chart is prepared by plotting stock prices suffered a significant price change. Transaction volume is not shown in the chart. Horizontal line shows the time but according to calendar time is not important. The symbol 'X' and 'O' is used in the above chart. 'X' indicates an upward price movement. Signs 'O' show downward price movement. All the 'X' or 'O' represents the value of Rs 1, Rs 2, Rs 5 and so on depending on the value of the stock price changes. The 'X' and 'O' only recorded when a certain amount of price movement.

3. Relative Strength Index

Relative strength index is the ratio of stock prices to a market or industry index or ratio compared to the average share price of the stock price. This ratio is plotted over time. This line shows the strength of the stock relative to the foundation selected as industry, market and so on.

EFFICIENT MARKET

HYPOTHESIS

CONCEPT OF EFFICIENT MARKET HYPOTHESIS

Definition Efficient market hypothesis is the market in

which security prices fully described all known information quickly and accurately.

It is key to the determination of share prices in the market.

CONDITIONS THAT CREATE EFFICIENT

MARKETS

There are many investors who are rational and seek to maximize profits and is actively involved in the market.

Information can be easily obtained without any restrictions or conditions that make it difficult for a person to get information.

Information can be obtained at random where the announcement was made independently. This means that all announcements made by the company should be done when necessary, without any connection with the announcement made by other companies.

Investors respond quickly and fully to new information in the market and cause the stock price quickly adjusted in line with the new information.

THE TYPES OF INFORMATION

Past informationThis is information that is relevant to the valuation of shares by analyzing past market price data.

Public informationThis is information about a company, the industry and the world economy can be obtained through a public announcement.

Internal informationThis information is only held by a few individuals who have a position in a company.

FORM OF THE EFFICIENT MARKET

Weak FormIt states on the share prices already reflect all kinmi time stock quotes ago.

The Semi-Strong FormIt states that stock prices reflect all information that has been around or known. information include stock prices, accounting reports, economic data, company earnings announcements and other information relevant to investors in the valuation of a company.

Strong FormIt states that stock prices reflect all information either has been announced or yet to be announced. This means that the information has yet to be announced can also be absorbed by the market as reflected by the market price of shares

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