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analysis has traditionally been split between two camps: fundamental
analysis and technical analysis. The former places its emphasis on the
analysis of corporate data, income statements and balance sheets, in an attempt
to evaluate the basic worth of a company for comparison with the market value of
its stock. To the contrary, technical analysis focuses attention almost
entirely on the price action of the stock itself and its relative position in
the market. We will follow the traditional division and cover the two types of
stock analysis separately.
Equity Risk Premium Why worry about stocks and the risks they represent? There's money at stake; that's why. One of the most interesting puzzles in finance has to do with how much more in return investors should expect from stocks than bonds in exchange for taking on the greater risk that stocks present. Fundamental Analysis RiskGrades: offers no less than a single standardized measure of volatility to provide a comparison of broad investment risk across the world's financial assets. Developed in the mid-1990s by JP Morgan, a global investment bank, the service is offered free give individual investors reliable way to measure market risk. Registration and a certain amount of thought and effort is required, but it is well worth it. A truly outstanding site. Earnings.com is a major source of information. Burkenroad Reports conveys the work of a group of Tulane University business school students who cover a group of small companies in six southeastern states. The results over the past six years have been surprisingly good. Suspended because of Hurricane Katrina, the students' stock research is scheduled to resume when Tulane re-opens in January. IPOs Screens One of the most practical tools for stock analysis on the Internet is the stock screen by which a search can be made for those stocks that satisfy criteria set by the user. Screens vary widely both in terms of capability and cost. Here are several worth considering: MarketScreen, MarketWatch, Morningstar, MSN Money, Reuters, SmartMoney, Yahoo! Finance, and Zacks. Nasdaq's Investor Tools has two interesting screens: SharpScreen and Guru Screen. Splits In keeping track of your investments, one of the most annoying and time consuming tasks is recording stock splits and their consequences. These sites can help: Yahoo!, Online Investor and Business Week. Technical Analysis The opinions offered here are based on technical analysis: Valuation The process of determining the present value of future amounts of money is called 'discounting.' We all agree that a dollar today is worth more than a dollar tomorrow. Discounting enables us to determine how much more. Discounting has long been used to determine a stock's so-called 'fundamental' value, defined as the discounted value of the price expected upon sale of the stock plus the discounted value of any dividends received while it was held. The argument is that you should pay no more for a stock today than the present value of all future gains from owning it. The actual discounting calculations are based on a series of dividend discount models. DividendDiscountModel is a site that lets you use the discounting process. Damodaran Online, the website of Professor Aswath Damodaran, an expert on securities valuation, is a true goldmine of tools and information.
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