OLLI 2014 Class Catalog - Osher Lifelong Learning Institute, University of Nevada, Reno
UD Osher – OLLI
Transcript of UD Osher – OLLI
Investing for Successful Retirement
UD Osher – OLLIFall 2021
Rajeev A. VaidyaRon Materniak Jane Roe-Fox
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Disclaimer in plain language
Opinions are like noses, everyone has one !
You are going to see mine in this course !!
We are simply sharing our perspective.
This is not investment advice or recommendation.
Ron, Jane and I are not a financial advisors.
This course is for educational purposes only.
Form your own opinion, make your own investment decisions.
Disclaimer – in plain language:
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Current State of the market – 20 minutes
Investing in individual EquitiesWhy?Styles – Value, Growth, MomentumHow? – The 5 Basic Steps
This week – Oct 20th
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Atlanta FED GDP Nowcast
https://www.atlantafed.org/cqer/research/gdpnow
3.7% on 9/212.3% on 10/11.3% on 10/51.3% on 10/81.2% on 10/150.5% on 10/19
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JPM High speed – Credit card data
https://markets.jpmorgan.com/research/open/latest/publication/9002054
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Risks• Path of the pandemic• Unemployment• Supply Chain Issues
S&P 500 Earnings – Factset 10/15/’21https://www.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_101521.pdf
• 8% reported – 80% positive EPS surprise.
• Q321 EPS growth 30.0% vs. Q320 was 27.6% last week.
• Likely result will be ~ 34%
• Fwd. looking P/E ratio = 20.3 (was 20.5 last week)
• Bottom-up S&P 500 Year end estimate is now at 5053.43, was 5051.70 last week
Estimates for the next three quarters are 12.1%, 12.5% and 12.8%
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Corporate Earnings - CFRAhttp://www.sectorspdr.com/sectorspdr/features/sector-research-center - CFRA sector valuation report
Forward 12 month earnings implied P/E
is 21.75Earnings bottom ? Up vs. the fcst. last
week.
CFRA EPS fcst. 2021 20228/27/2021 $200.01 $217.93
9/3/2021 $200.06 $217.77
9/10/2021 $200.08 $217.97
9/17/2021 $200.11 $217.82
9/24/2021 $199.74 $217.39
10/1/2021 $199.78 $217.05
10/8/2021 $199.95 $217.74
10/15/2021 $201.14 $218.00
Quarter Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022S&P 500 Earnings 38.77$ 41.47$ 42.23$ 41.57$ 34.16$ 27.72$ 38.84$ 41.80$ 48.72$ 52.26$ 49.33$ 50.83$ 51.29$ 54.13$ 55.38$ 57.21$
164.04$ 142.52$ 201.14$ 203.71$ 205.58$ 218.01$
S&P 500 earnings - CFRA 10/015/2021
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https://knowhowtoinvest.com/ - Issue # 9 July 2020
4200
40003500
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Close on 10/4 was a 5.2 % correction from the high on 9/2/21. 21 trading days to low. 11 since low.
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Current State of the market – 20 minutes
Investing in individual EquitiesWhy?Styles – Value, Growth, MomentumHow? – The 5 Basic Steps
This week – Oct 20th
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Types of Risk
Systematic Risk – macroeconomic and other “system” events that influence the value of financial assets in general.
Unsystematic Risk Risk in the Stockmarket
How stocks will perform in the current financial environment. Measured by volatility in the asset class Correlation of the asset class to the economy and other asset classes.
Risks to specific sectors / industries within the stock market. How the industry will perform in the current economy Measured by volatility in a specific sector
Risk in a specific company within the sector/industry How the company performs in the sector/industry What happens to that company Measured by Beta for that company within the market.
Why are you taking risk?
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https://www.morningstar.com/articles/1035348/how-many-stocks-beat-the-indexesJohn Rekenthaler – MorningStar - 4/26/2021
Your odds as a buy and hold investor
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Dividend & Treasury Yields
http://indexarb.com/dividendYieldSorteddj.html – 12mon fwd. looking dividend yields for the Dow 3019 of the 30 DJIA stocks have an expected yield > 2.0% as of Oct 16th 2021
Sure Dividend Newsletter – website data - 373 Russell 2000 Stocks have a Dividend yield > 2.0%
https://www.yardeni.com/pub/dividends.pdf
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Investment Styles
Momentum Investing – we covered this in detail last semester Follow the big boys Today’s winners will beat today’s losers tomorrow
Value Investing Good companies with growth prospects Selling at a discount vs. market / peers and current / future valuation
Growth Investing Companies with high growth and more potential to grow Good growth – strong underlying demand trend, sustainable competitive
advantage Investing for Income – we covered this in class 5 on Oct 6th
High quality growing companies with high and growing dividends As bond substitutes with adequate protection of principal
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Momentum Investing
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https://www.investopedia.com/terms/m/momentum_investing.asp
Buy companies that have grown the most in price. Today’s winners will do better tomorrow than today’s losers. More technical than fundamental analysis Follow the trend Buy High .. Sell Higher
Buy with holds to minimize losses Ride winners
Hold periods can vary, buy and sell on technical signals. Companies tend to have high P/Es (if meaningful) and higher Betas
Winners keep winning
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Momentum – the “N”, “K” strategy• Buy stocks in the top decile of performance over the last “N” weeks
• N is 13 to 52 weeks … 26 to 52 best.• Hold them for “K” weeks
• K is 13 to 52 weeks• K is typically shorter than N … higher K’s reduce profits.
• Rotating portfolio … updated monthly for the last 12 months• Impractical for the average investor.
• Persistence in winners• Challenges the Efficient Market Theoryhttps://anderson-review.ucla.edu/momentum/
Jegadeesh and Titman – Journal of Finance 1990, 1993 and 2001 … in the UD on-line library.
Momentum Investing:Rules of the party
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Don’t be the first one at the party Established trend
Don’t be the last one to leave Never wrong making a profit This is not a buy and hold investment.
Don’t waste time examining the fundamentals Crowd appeal and the “story” matter.
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Investment strategy / style - Growth
Buy Good companies that will grow sales and earnings faster than the market / their peers. Find companies with demonstrated high growth, that have the potential
to continue growing fast. More fundamental analysis than technical analysis Buy High .. Sell Higher
Buy with holds to minimize losses Ride winners
Hold periods can vary, but can be long with good leading companies with long growth runways.
Companies tend to have higher P/Es and higher Betas.
GARP – Growth at reasonable price. Growth and Value PEG is commonly used metric.
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Investment strategy / style - Value
Buy Good quality companies when the market price is below potential value. Sell when the shares rise and become overvalued. Find high quality growing companies More fundamental analysis than technical analysis Wait for good buying opportunities
Buy when you see a catalyst for the market to see the value Buy Low Sell High
Typical hold periods are long. Must have a catalyst and liquidity in the up move
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This is a good investment because …….
This is a good price / entry point to buy because …….
Investment thesis:ValuationEntry Point:
If I am right, I will make gains by selling the stock @ …….
If I am wrong, I will limit losses by exiting the position @….
Exit Rules:
I can buy XXX shares for my portfolio
Position Size:
Buying an Individual StockDisciplined buying
70% 30%
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Indicators of Quality
A bad stock is not worth owning at any price!!
First Investment Decision: QualityIs this a good company to own?
Demonstrated sales growth in a growth market Demonstrated earnings growth Good Profit Margins High return on Invested Capital and Equity Good Management Team
Typically we are looking for leaders in an industry group. It is very important to understand a company relative to its peers in an
industry Comparison of financial measures across industry groups can lead to
misleading conclusions.
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The 9 Buffet questions
Consumer monopoly in a growth market? Strong earnings with an upward trend? Conservatively financed? Consistent high return on equity? Are earnings retained? Small expenditures to maintain operations? Management track record in investing retained earnings Can company adjust prices with inflation? Do retained earnings increase market value?
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Investment thesis
The industry leader XYZ is a good investment because: Reason 1 Reason 2 Reason 3
Risks to this investment are Risk 1 Risk 2
Come back to re-examine this thesis frequently
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p/e ratio dividend yields book value p/cash flow ratio p/sales ratio
Fundamental AnalysisValue: Is this a good price to buy at?
Measures of value Benchmarks of value
vs. history vs. industry peers vs. market
Sources of information• Value Line sheet• CFRA report• Ford Equity Report
What is the right range for these valuation ratiosFor the company in question?
How does the current value for these ratios compare to this range?
What is the future potential value for the company?
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The easy way
Minimum calculations
Analyst reports Value Line CFRA Ford Equity Report The Street Quant Report
What are the forecasted target prices?
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Support Levels
Term from technical analysis:Definition: A price range where the market has repeatedly reversed a
downward trend. Support levels can be read from the stock chart
Support levels Offer downside protection Offer a place where prices will slow down in a decline If penetrated by a downtrend can signify further downside.
Support levels are a good marker for Rethinking a buy decision Stop orders
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Position Exits
What will I do to limit losses if my bullish view is wrong?
Position exits Just Below a support level or a moving average A fixed % or amount of loss
Maximum projected loss per share Buy price – planned exit price.
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Price
Planned Exit Price(support levels in the chart)
Estimated High Price(from the valuation work)
Current Price
Upside = Projected Hi - Current
Downside = Current - Exit
U/D Ratio =UpsideDownside
Buy with Good Upside Downside Ratio
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Buy with good projected returns
Price
Estimated Low Price
Estimated High Price
Current Price
% gain = Hi price
Current priceX 100 - 100
Investments can generate returns in two ways: Dividends Capital gains - Stock price appreciation
Time is a factor – Capital gains per year (CAGR) Total return per year = CAP Gains CAGR +
dividend yield 15% per year – doubles money in 5 years Total return should be more than projected
market average – source Value Line
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This is a good investment because …….
This is a good price / entry point to buy because …….
Investment thesis:ValuationEntry Point:
If I am right, I will make gains by selling the stock @ …….
If I am wrong, I will limit losses by exiting the position @….
Exit Rules:
I can buy XXX shares for my portfolio
Position Size:
Buying an Individual StockDisciplined buying
70% 30%
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1. Set these parameters for your portfolio.A. Max position size for any one investment in the portfolio – 1-5%B. Max loss tolerated in any single investment
i. As a % of the total portfolio – 1%ii. As a % of the single investment – 5-10%
2. Calculate maximum number of units of any investment based on:1. Limiting max. position size in portfolio = Formula 12. Limiting max loss per investment in portfolio = Formula 2
3. Pick the lesser of the two numbers as your max position size.
Position sizing rule:
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Current State of the market – 20 minutes
Sources of information for StocksYour brokerUD Library – Value Line, OthersOthers
Next week – Oct 27th
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Monthly Newsletter
All proceeds donated in INR to charitable foundation operational for the last 9 years.
Helped over 30,000 children with learning disabilities
Helping Children with Learning Disabilities achieve their potential shantavaidyafoundation.org
Inve$t-edthe investment education newsletterhttps://knowhowtoinvest.com/
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Thanks !!
Happy Investing !!
Class websitehttp://udel.edu/~diyinvst
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