The Stock Market Game

Links to sites for economic, industry, and company analyses

Federal Reserve Bank site related to economy http://www.phil.frb.org/files/liv/livjun00.pdf

Dismal Scientist at http://dismal.com

Industry

1. There is fairly wide dispersion in the performance of various industries. This implies that industry analysis is important to identify good and poor industries.
2. There is very little consistency in absolute or relative industry performance over time. Therefore, it is not possible simply to extrapolate future behavior from past performance. Therefore, you must determine future performance on the basis of future expectations of earnings and the earnings multiplier.
3. There is dispersion in the performance of various companies within industries. This finding doesn't negate the value of industry analysis, but it means that after industry analysis, you must carry out company analysis to pick better companies within desirable industries.
4. Risk--There is wide dispersion between industries during a given time but the risk measures for individual industries were reasonably consistent over time.

www.smartmoney.com

Stovall's S&P Sector Watch/Strategy

Wall Street City

The Smart Money's Map of the Market

Big Charts http://www.bigchart.com

MSN at moneycentral.msn.com

Company Analysis with Marketguide

The Snapshot

1. Basic Information
2. Earnings Announcements
3. Ratios & Statistics
   • Price & Volume
   • Valuation Ratios
   • Share Related Items
   • Per Share Data
   • Dividend Information
   • Management Effectiveness
   • Financial Strength
   • Profitability Ratios

The other reports include: Quotes, News, Price charts, Highlights (growth rates, quarterly trends, etc.), Multex.com Earnings Estimates, Performance, RAtio comparisons, Insider trading, institutional ownership, Financials, DRIP, Wrapping it all Up.

Technical Analysis

Go to Stockcharts.com at http://www.stockcharts.com/charts/$NAAD.html which gives you Nasdaq Advance-Decline Line ($NAAD). Interpret this chart using Chart School again.

http://www.yahoo.com, click on [finance/quotes], under Investing, Today's markets, click on [indices], click on ^DJI for Dow Jones Industrial Average, underneath the chart click on big 1y for big one year chart, then put check mark in S&P and Nasdaq then click on compare button. You will get a comparison of Dow, S&P and Nasdaq. Comment on this comparison of three indices for one year.

Now click on Moving Average. This graph will give you Dow versus a 200-day moving average and a 50-day moving average. Discuss the trend of Dow versus the two moving averages.

Consider the chart of MSCI EAFE at www.mscidata.com/mstool/mschart.wsx/std

Also check the following sites:

Stock Screeners

• Market player's improved PEG screen gives a list of large cap, low price-to-earnings growth companies with stable long-term growth rates.IBD New 52 Wk High on Big Volume This screen is a great shortcut if you' re looking for stocks that are generating a lot of investor interest. This screen finds companies posting new highs on extraordinary volume, similar to the companies highlighted in Investors Business Daily's stock tables.
• Also check out Warren Buffett Stable Growth Screen, Gary Smith's short selling screen, Ken Heebner High growth screen, low price/normalized earnings screen, low P/book, div yield, P/sales screen, ridiculously high valuation screen. You can learn more about these screens on the site.

1. Large-cap stocks with high momentum Shares of companies with market capitalizations over $5 billion with the greatest three-month price gains relative to the rest of the market.
2. Mid-cap stocks with high momentum Shares of companies with market capitalizations between $500 million and $5 billion with the greatest three-month price gains relative to the rest of the market.
3. Small-cap stocks with high momentum Shares of companies with market capitalizations between $50 million and $500 million with the greatest three-month price gains relative to the rest of the market.
4. Cheapest Stocks of Large, Growing Companies Stocks of companies with market caps greater than $5 billion that are growing earnings at least 20% a year but have price-earnings ratios less than 20 and price-sales ratios less than 1.5.
5. Highest-Yielding Stocks in the S&P 500 Stocks of companies in the Standard & Poor's 500 Index that have the highest dividend yields. These are often considered the index's most undervalued stocks because their prices are low relative to their dividends.
6. Dogs of the Dow, Investor-Style Stocks in the Dow Jones Industrials Average with the highest dividend yield, lowest price-earnings ratio and lowest price.

1. Contrarian Strategy This approach is based on going against the crowd by seeking stocks out of favor with the overall market and avoiding the high flyers. It is based on the notion that eventually the market will rediscover out-of-favor stocks and bring the high-flyers back to earth. It looks for medium to large cap stocks with low price/earnings ratios, relatively generous dividends and a strong enough financial position to weather temporary problems.
2. Distressed Stock Plays This screen is for those who are looking for turnaround plays. It searches for companies with a market capitalization of at least $50 million, and with their stock prices near 52-week lows. But the companies are showing positive price momentum lately. They've also registered year-to-year revenue growth and are projected by analysts to show at least 20% earnings growth in the next year.
3. Estimated Earnings Up When the securities analysts who most closely follow a company or a group of companies raise their earnings estimates for those firms, it is usually a bullish sign. Zacks Investment Research tracks these analyst estimates for the firms whose stocks are most heavily traded, and this screen highlights those with the highest earnings per share growth projected for next year for which the consensus estimates have been raised.
4. GARP Go-getters This screen, based on Acorn Fund manager Ralph Wanger's "growth at a reasonable price" approach, focuses on finding opportunities at modest risk in smaller capitalization stocks. To limit risk, Wanger suggests companies with strong, proven management, a sound balance sheet and a strong position in their industry while steering clear of those which are already overpriced. Wanger is also the author of "A Zebra in Lion Country."
5. Great Expectations This screen should appeal particularly to "value" investors, but it is biased toward smaller companies and looks across all sectors. It includes parameters such as high return on investment and low debt to equity ratio in order to set a quality bar. The result: Beaten-up stocks with a lot of potential growth ahead.
6. Momentum Stocks This screen looks for stocks whose prices have screamed higher in the past six months on increasing volume. An overlay of $100-million market cap and 10,000 average daily volume separates out the smallest companies. We use this screen only to identify recent top performers regardless of valuation.
7. New 52-week Highs Stocks that hit new highs often keep going higher still. This screen looks for such favorites while giving you the opportunity to decide the stock exchange for your search. It orders the results according to which stocks have had the strongest price performance over the last three months.
8. O'Shaughnessy Growth Stocks This screen looks for stocks that have high projected 1- and 5-year earnings growth rates and price-earnings multiples less than their five year projected growth rate. A strategy of buying the top 10 by six-month price appreciation and holding for one year has produced market-beating returns over the past 20 years, according to testing by quantitative analyst, money manager and author Jim O'Shaughnessy. To create a growth+value portfolio of 30 stocks, combine these with 20 stocks from the SAPI Slugs screen. Rerun the screens after one year and rebalance the portfolio.
   
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9. Righteous Rockets The companies that this screen bubbles up appear undervalued, are profitable, and have strong balance sheets -- which makes them "righteous." But they also are fast growing and have begun to see significant stock price appreciation -- which makes them "rockets." The screen looks for companies that are priced low relative to their revenues, that have low debt, and which, while still relatively cheap, have begun to rise in price.
10. SAPI Slugs This simple but effective value screen presents a pure yield play. It is similar but potentially superior to the better-known Dogs of the Dow screen in that it draws from a wider pool of large stocks and includes a secondary financial-strength overlay. The screen was developed and tested by money manager and author ("What Works on Wall Street") Jim O'Shaughnessy. The strategy calls for buying the top 20 stocks in the result set of this screen, ranked by dividend yield, holding them for a year and then re-balancing. It can be combined with O'Shaughnessy's Momentum Growth screen to create a balanced 30-stock, 1-year portfolio.
11. The Year's Winners This screen looks for the stocks that have had the greatest price appreciation over the last year, and allows you to choose the sector you favor.

Custom Screens

1. To define value priced: price/earnings, pice/sales, price/book ratios are commonly used to quantify a stock's current valuation. Definitions vary, but typical measure to define value/priced stocks would be:P/E less than 20, P/S less than 2, and P/B less than 2.
2. To define mid-size: Market capitalization (shares outstanding multiplied by stock price) is a gauge of company size. Specifying market cap greater than $2 billion and less than $8 billion would fit most analysts' definition of a midsize company.
3. To define consisteny earnings growth: Five-year average annual earnings growth is a good tool for eliminating stocks with inconsistent or nonexistent earnings growth. Requiring 15 percent, five-year growth would do the trick.

1. multiple industry classes. With this option, you can search as many industry categories as you like. Hold down the control key (Ctrl) on your keyboard when you click on industry names to select multiple categories.The categorization of all publicly traded companies into industries using a numerical system based on the nature of the good or service the company produces. Examples of industries include: Aerospace, Computer Software, and Food & Beverage. Similar industries are sometimes grouped together and referred to as sectors such as: Technology, Utilities, and Financial Services. Investment advisors generally recommend that an investor diversify his or her portfolio by holding several classes of investments. This tends to reduce overall risk, although it does not protect against a loss.
2. S&P Index The Standard & Poor's Corp. calculates a number of indexes designed to track daily changes in the entire market or a segment of it. S&P indexes are market-value weighted, which means that stock prices of the companies within an index are multiplied by the number of shares outstanding to calculate the index. Consequently, the largest companies have the greatest influence on an index’s movement. A Standard & Poor's Corp. committee determines the actual companies that make up the S&P indexes. The best known Standard & Poor’s index is the S&P 500, a large-cap index of 500 widely held domestic stocks, designed to emulate the market as a whole. It is a popular benchmark for measuring portfolio performance and a model for a growing number of index mutual funds. The S&P 500 is divided into four industry groups: Industrials, Financial, Transportation, and Utilities. Standard & Poor’s tracks all four industry groups in separate indexes. By far the largest group is the Industrials with 376 companies in the S&P 500. Next is Financials with 72 banks, brokerages, and other financial services companies. Utilities has 41 companies, and Transportation has 11 airlines and other companies. Standard & Poor’s does not mandate the number of companies in each group, but all together they must add up to 500. Other S&P indexes include the MidCap 400, an index of 400 domestic companies with an average market capitalization of $2 billion, and the SmallCap 600, an index of 600 widely held companies with an average market capitalization of just over $500 million.
   
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3. 1-, 3-, and 5-year EPS growth: Earnings per share (EPS) The net income (or earnings) of a company for the past 12 months divided by the current number of shares. For example, if a company has $2 million in net income and 2 million outstanding shares, then its earnings per share is $1.00. Many investors consider this an important fundamental to consider when deciding whether to buy or sell a stock.
4. Market capitalization The total number of a company's shares multiplied by the current price per share. For example, if a company has 10 million shares, and the current price per share is $20, then the company's market capitalization is $200 million ($20 x 10 million). When investors refer to small cap , mid cap , or large cap stocks, they're referring to the amount of the stock's market capitalization. In the Quicken.com Portfolio, stocks with a market cap below $3.5 billion are designated as small cap, and stocks with market caps above $3.5 billion are deemed to be large caps. For mutual fund data at Quicken.com, Morningstar determines market cap size. Currently, funds with a median market cap below $1.7 billion are small caps. Funds with a market cap between $1.7 billion and $10.74 billion are midcaps, and funds with median market caps above $10.74 billion are large caps.
5. Price/Earnings Ratio (P/E) An indicator of a stock's value. To figure out the price-earnings ratio, you divide the stock's price by its earnings per share for a 12-month period. For example, if a stock is selling for $30 and is earning $3 a share, its P/E ratio is 10 (30/3). Applied to mutual funds, the P/E ratio is the weighted average of all the stocks' P/E ratios in the mutual fund's portfolio. Larger positions have greater influence on the fund's overall P/E, an indicator of the type of stocks the fund holds. The P/E ratio provides insight into valuation using an easily understood yardstick: earnings. Stocks with high P/Es compared to the overall market are typically growth stocks. Investors are willing to pay a premium because they expect the company's earnings and stock price to rise. Stocks with low P/Es are sometimes considered overlooked value stocks. Because earnings are volatile, and sometimes "negative," the P/E has its limitations and may fail as a measure for a significant number of stocks at any given time.
6. Price/Book Ratio (P/B) An indicator of whether a stock is fairly valued. The price-book ratio compares a stock's market value (or current price) to its per share book value (total assets minus intangible assets and total liabilities). In evaluating stocks, comparing price-book ratios often works well in situations where price-earnings ratios do not because P/B is stable over time and is always a positive number. Price-book ratios are best used for comparisons within an industry rather than between industries. Some industry sectors contain only companies with a high (or low) ratio. Applied to mutual funds, the P/B ratio is the weighted average of all the stocks in the mutual fund's portfolio. Larger holdings have a greater influence on a fund's overall P/B. It's a good idea to look beyond the P/B ratio because the asset values can be understated on a company's balance sheet. Real estate carried on the books for a number of years, for example, is often listed at the purchase price rather than the usually much higher market price. When that happens, the book value is actually higher than reported, and the P/B ratio will be inaccurate. Book value also does not include such intangibles as goodwill, copyrights, and patents.
   
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7. Price/Sales Ratio (P/S) Compares the price-per-share of a stock to its sales-per-share (sales-per-share is arrived at by dividing total revenue by shares outstanding). Alternatively, the price-sales ratio can be calculated by dividing a stock's market capitalization by its total revenue. The price-sales ratio is often used to value companies that lack a stable history of positive earnings. The price-sales ratio is never a negative number. It will tend to act as a proxy for earnings margin (i.e. low price-sales ratio companies often have low margins.)
8. Dividend yield The result of amount of dividends per share divided by a stock's current market price. For example, if a stock's current price is $40, and the company pays a $5.00 dividend per share per year, then the dividend yield is 12.5 percent (5/40 = 0.125, which equals 12.5%). Several popular investing strategies are based on stocks' dividend yield. You can find a stock's dividend yield in most newspapers or by using Quotes Plus. Today, many companies opt not to pay dividends, preferring instead to reward investors through stock appreciation that results from plowing all earnings back into the company.
9. 1-, 3-, and 5-year revenue growth: Total revenue The dollar amount of annual sales, net of allowances (discounts, returned merchandise). It is the "top line" figure from which costs are subtracted to determine net income. In evaluating stocks, revenue growth is often an indication of a healthy company. However, acquisitions and divestitures will skew revenue growth figures. For all but the most successful companies, the growth rates change quarterly, so these values should be checked often.
10. 1-, 3-, and 5-year income growth: Net income The amount of a company's total sales (revenue) remaining after subtracting all of its costs, in a given period of time (also referred to as "net earnings"). This very important figure (literally the source of the term "the bottom line" for where you find it on an income statement) is the best measure of the current operating state of a company. Earnings per share (or "EPS") is found by dividing this figure by the number of share of common stock outstanding.
11. Revenue per employee A company's total revenue divided by the number of its employees. In general, the higher the number, the more efficient the company uses its employees.
12. Income per employee A company's net income divided by the number of employees. In general, the higher the number, the more efficient the company uses its employees. The best use of this number is when comparing companies of a very similar nature. There are no rules about what constitutes a "good" level of income per employee, or a "bad" level.
    
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13. Current ratio A company's current assets (typically cash + receivables + inventory) divided by its current liabilities (debt due within a year). This ratio gives you a sense of a company's ability to meet all short-term liabilities with liquid assets, should it need to. A ratio of 1 implies adequate current assets to cover current liabilities, and the higher above 1, the better. This ratio is an adequate measure of financial strength in the short term, and can be used on a comparative basis among companies. You must, however, be careful not to make implicit assumptions about a company's earnings or cash flow sustainability simply from the current ratio.
14. Quick ratio A measure of a company's ability to meet its short-term financial obligations with its liquid assets. To determine the quick ratio, the company's liquid current assets (cash, accounts receivable, marketable securities) is divided by its current liabilities. The quick ratio is similar to the current ratio, but does not include inventory as a current asset. In general, a healthy company should have a quick ratio of at least 1.0.
15. Profit margin Determined by dividing net income by net sales during a time period (usually the past four quarters) and is expressed as a percentage. Net profit margin is a measure of efficiency and the higher the margin, the better. Trends in margin can be attributed to rising/falling production costs or rising/falling price of the goods sold.
16. Debt-equity ratio The ratio of a company's liabilities to its equity (total value of stock). Long-term debt-equity is the ratio of a company's long-term liabilities (debt that won't be paid off in one year) to its equity. Total debt-equity is the ratio of a company's long-term and current liabilities (debt that will be paid off within one year) to its equity. The higher the level of debt, the more important it is for a company to have positive earnings and steady cash flow. Debt in and of itself is not "bad," but since it requires the timely payout of interest to debt holders, it is important to analyze a company within the context of the likeliness that it will have adequate resources to meet its payments in the coming business and economic environment. By the nature of certain industries, you will find that some contain only companies with a high ratio (or vice versa). So, for comparative purposes, debt-equity ratio is most useful for companies within the same industry. See also debt-assets ratio.
    
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17. Debt-assets ratio The ratio of a company's liabilities to its total assets. Long-term debt-assets is the ratio of long-term liabilities (those that won't be paid off in one year) to total assets. Total debt-assets is the ratio of long-term and current liabilities (debt that will be paid off within one year) to total assets. The higher the level of debt, the more important it is for a company to have positive earnings and steady cash flow. Assets are also important to consider because they can be a cushion against losses in the event of liquidation. Debt is not "bad," but since it requires the timely payout of interest to debt holders, it is important to analyze a company within the context of the likeliness that it will have adequate resources to meet its payments in the event of major losses. Because of the nature of certain industries, some industry sectors contain only companies with a high (or low) ratio. So, for comparative purposes, debt-assets ratio is most useful for companies within the same industry. See also debt-equity ratio.
18. Total return The average annualized rate-of-return over a specified time period.
19. Return on assets (ROA) The amount of profits earned (before interest and taxes), expressed as a percentage of total assets. This is a widely followed measure of profitability, thus the higher the number the better. As long as a company's ROA exceeds its interest rate on borrowing, it's said to have positive financial leverage.
20. Return on equity (ROE) A percentage that indicates how well common stockholders' invested money is being used. The percentage is the result of dividing net earnings by common stockholders' equity. The ROE is used for measuring growth and profitability. You can compare a company's ROE to the ROE of its industry to determine how a company is doing compared to its competition.
21. 52-week high & low: Share price The price of a unit of ownership in a company (a share). The most recent trade in the stock is typically used as the "quoted" share price. You can arrive at market capitalization by multiplying share price times total shares outstanding for a particular company. While of little analytical value in and of itself, share price is worth consideration in two ways. If a stock's price is too high, it may prevent individuals from being able to purchase enough shares to make up a round lot (100 shares). Also, there is a general rule that stocks below $5/share are deemed to be "speculative," many of which are referred to as "penny stocks."
    
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22. Beta A measure of a stock's volatility relative to the overall market. Stocks and equity mutual funds are usually measured against the S&P 500 while bond funds commonly use the Lehman Brothers Aggregate Bond Index as a benchmark. Any security or fund with a beta higher than 1 is more volatile than the market. A stock fund with a beta of 1.1, for example, would go up 11% when the S&P 500 rises 10%. On the other hand the fund would also go down 11% when the S&P 500 declines 10%. Conservative investors ideally seek stocks and funds with low betas, whereas investors willing to take more risk seek high-beta investments. This statistic is only useful when the performance of a stock or fund is closely tied to the index against which it is measured. Gold funds typically have low betas when compared to the S&P 500, which should indicate that they are not risky investments. But nothing could be further from the truth. Historically the performance of the stock market has had little to do with the price of gold.
23. Percentage held by institutions The percentage of a stock's traded shares that are held by institutions (such as pension funds, endowments, and foundations). It is determined by dividing the total number of shares outstanding by the number of shares owned by institutions. Most stocks are 30-60% held by institutions. This figure is most telling at the extremes. Stocks with little or no institutional ownership may be "unknown" to large investors or just thought poorly of.

1. InvesterTech http://www.investertech.com Choose [Easy Select]. This site provides several technical analysis screening variables such as moving averages, Bollinger Bands, ect...
2. Silicon Investor http://www.siliconinvestor.com. Select [Market Tools] and on SI navigation list box on top right corner of the page, select stock screener. This screener uses fundamental variables such as sales, earnings growth, valuation ratios, management effectiveness measures, ect... What is unusual is their selection of price and tecnical analysis criteria. You can search for stocks closing within user selected percentages of its 40-day, 6-month or 52-week highs or lows. You can also screen for stocks crossing above or below their 40-day, 6-month or 52-week highs or lows. Detecting stocks crossing above recent highs is an important element of many momentum stock selection strategies.Some of the following indicators are also available if you click on [How Stock Screener Works]: RSI, Relative Strengh Index, Stochastics , Momentum , CCI (Commodity Channel Index), OBV (On Balance Volume), MACD (Moving Average Convergence/Divergence), DMI (Directional Moving Index) and Ultimate Oscillator.

Online Portfolio Trackers or Portfolio Managers

1. At the top of the screen, click Portfolio.
2. Click New Account.
3. Click Watch, and then click Next.
4. In Account Name, type a name.
5. In Type the symbols..., type all the symbols you want to include.
6. Check Model Portfolio, and then click whether you want to base your model on equal shares, equal dollars, or total portfolio value.
7. In the Last Price As Of box, select the current date or type a new date.
8. Click Finish.
9. Tip. When you set up a model portfolio, shares of a foreign investment are valued in the foreign currency. For example, if you add a stock traded on the London exchange and check $10,000 of each stock, the model portfolio will contain £10,000 worth of shares. You can use currency translation to convert all share prices to a single currency after you have set up the model portfolio.

1. Current Quotes displays the day's open, high, low, close, change and volume. The view displays a news icon if there is recent news on the stocks. Click on the icon to display the headlines; read the complete story by clicking on the headline. You can program this tracker to display an "alert" icon when the stock price goes above or below the breakout limits you've set. You can also choose to be alerted when a company executive makes an on-air appearance on CNBC.
   
2. Insider trading shows you a graphic display of each company's "insider rank", a measure of insider buying and selling activity. The screen also displays the details: number of buys, sells, option exercises, and the 3-month, 6-month, and 12-month changes in those numbers. The insider rank is important, because it alerts you to trading activity, even though it doesn't show you important details such as who's buying or selling, number of shares traded, and so forth. It's up to you to investigate further.
   
3. Current valuation shows you how you're doing by comparing current values to what you paid.
4. Today's event lists the current and previous day's news headlines for each stock in your portfolio. You can click on the headlines to read the full story.
5. +/- valuation ratio displays CNBC's assessment of each of your stock's valuation based on price/sales rank. It's an effective graphic display that clearly shows how each stock ranks. The screen also displays ratios for P/E (price/earnings), relative P/E, projected P/E (P/E based on this year's forecast earnings), price to book, price to cash-flow, debt to equity, and current ratios. Price/sales rank doesn't mean much by itself, but this screen gives you a good picture of your portfolio's valuation using a variety of measures.
6. Analyst ratings display the average analysts' buy/hold/sell ratings on each stock along with details such as a breakdown of the buy/hold/sell ratings, and a recent positive and negative surprises.
7. Technical rankings displays composite values for a variety of fundamental and technical ranking factors for your combined portfolio. More valuable are the individual rankings of each stock. All ranking values range between 1 and 99, and higher is better. Some ranking indicators are powerful and quite useful.

Learn the Jargon/Lingo

send e-mail : smr8609@louisiana.edu