Practicing share investing.....

willing2learn_3

Ok i'm stuck! lol. I need someone to give me just a clue as to where i might begin......if poss....

The stock screener alows you to put values in for the following criteria:

Market Cap
Revenue
Operating Profit/Loss
P/E
PEG
Price to Sales Ratio
Beta
Divident Yield

On the help page it suggests these values:

Market Cap = minimum of 500
PEG = minimum 0.7
Dividend Yield = minimum 3.5

There is a glossary explaining these terms......but i would love to find something that guides me or explains why you would put certain values in....

and i know i sound thick :rotfl:

tradetime

Market Cap allows you to compare like with like in terms of size of company, I'm not sure if the standar definitions figures wise are the same here as in the US, but generall companies in the US are defined as;

Small Cap under $1billion so under £500 - £750 million
Mid Cap $1 - $10 billion so £750 mill - £7billion
Large Cap $10 billion plus so £7 billion plus

again, I don't know whether it translates to sterlinglike that but you get the idea, if you want to invest in small cap companies for example, you want to screen out all the mid and large caps so you have a clear comparison of small caps.

Revenue is income before deductions. so you may want to find out the average revenue for the aforementions small caps in that industry and screen out all below that.

P/E price to earnings ratio often uesd in determining whether the stock is overvalued.

PEG ratio is derrived by deviding the P/E by expected growth of the stock, often used as a better indicatoe of value than the P/E

Price to Sales, again a valuation metric

Beta is a volatility measure comapring an individual stock to the market 1 is considered neutral, ie the stock will generally move at the same pace as the overall market, less than 1 ie 0.7 (low beta) suggest the stock will move 7% for every 10% the market moves, thus on the way up in a bull market a low beta stock will tend to underperform the market. but on the way down as in a bear market a low beta stock in general will not fall as fast as the market.
A high beta stock with a beta over 1 ie 1.5 will outperform in a bull market, ie will go up 15% for every 10% rise in the market, but will tend to fall harder also.

Dividend yield is how much the stock pays in dividends per year as a % of the stock price.

think thos definitions are pretty accurate, I don't really use fundamentals so someone will correct anything I've got wrong

willing2learn_3

Thankyou so much tradetime!!!!! :beer:

I've made some headway today - unfortunately i will have to sign off in a minute but i will be back and i will report my progress.

I have printed out your post and will take away to digest. Thanks again.

zedyy

im going to try this later, bookmarking thread.

DBrckll

No worries, Willingtolearn - good luck with figuring it all out. If you do end up entering into the Fund Challenge, my Stockopedia username is Moses in case you want to look me up. I am currently the 25th ranked fund there so I am a long way off the medals but there's some flights to Wall Street to be won as prizes so I will keep plugging away - fingers crossed. Cheers!

Blah99

tradetime wrote: »

again, I don't know whether it translates to sterlinglike that but you get the idea, if you want to invest in small cap companies for example, you want to screen out all the mid and large caps so you have a clear comparison of small caps.

In the UK, small cap is usually defined as under £250m. Mid cap is a little harder to define, but it's usually assumed to mean the FTSE250 outside of the FTSE100. The LSE has some (useless!) definitions:

http://www.ftse.com/Indices/UK_Indices/index.jsp

tradetime wrote: »

P/E price to earnings ratio often uesd in determining whether the stock is overvalued.

The important point is valuation to its peers. For example, it's very difficult to compare two companies in the same sector when they have vastly different fundamentals. Take for example BT versus Colt - in the same sector (telco), but BT's asset value, market cap, revenue etc massively exceeds Colt's. The PE is a way of comparing their anticipated future growth.

Imagine ACME Corp and Bumble Ltd, both in the Widgets sector. ACME is a market giant, with eleventy million customers and two thousand gazillion in turnover. Unfortunately ACME has reached its pinnacle and doesn't have much growth potential, so investors are only willing to pay £5 for every £1 of earnings (a p/e ratio of 5). Bumble is a little fish with only 500,000 customers and £100m turnover. But Bumble has a fantastic product, and they are rapidly acquiring market share from ACME. Bumble has lots of growth potential, so investors are willing to pay £10 for every £1 of earnings (pe ratio of 10).

Now, if the Widgets sector has an average p/e of 7, you can say that the market is expecting lower growth from ACME and higher growth from Bumble. So, despite the two companies being of vastly different sizes, you can use the p/e to get a simple comparison between them and their sector.

You can't use the p/e to compare companies in different sectors though, because the growth potential of companies in the Widgets industry is vastly different to those in the banking industry, who are all criminals.


Spot on definition of beta, tradetime!

tradetime

The important point is valuation to its peers. For example, it's very difficult to compare two companies in the same sector when they have vastly different fundamentals. Take for example BT versus Colt - in the same sector (telco), but BT's asset value, market cap, revenue etc massively exceeds Colt's. The PE is a way of comparing their anticipated future growth.

Possibly that's where the PEG ratio comes in, where P/E is related to growth, I think as you say P/E on its own can be very misleading to the unwary. A young company with great growth prospects can justify a much higher P/E that a much larger developed company who may find it dificult to grow any further, there is also the question of who's taking market share from who. Complicated stuff fundamnetals.
I don't use fundamentals and my memory of them is a tad rusty, so thanx for adding some clarificatios

willing2learn_3

Thanks for those replies! I've got a few hours to myself this afternoon so i will report back on any (slow!) progress! lol!

willing2learn_3

Hmmn....after reading Blah's account i am wondering what the opposite of growth potential would be? Wondering whether there's a way of identifying those that are likely to contract (or go under) dramatically - like so many have recently....

I know small caps are thought to be risky....

I guess if a stock is seen to be overvalued that's worth knowing....

I even thought that a company with good growth potential could be seen to be risky simply because it's not established....?

generalisations i know!

willing2learn_3

Okay I've got together a set of technical indicators that i would use to ascertain whether a stock is likely to do badly (and of course the opposite).

As far as using the screening functions on DL, I've also gathered (thanks to Blah and Tradetime) that i probably have to look at the following to identify stocks that are likely to do poorly:

Revenue - find those doing less than the average for companies in that industry....?

Beta - Look for a high beta stock?

Look also at Price to Sales, Price to Book and Gearing......also P/E and PEG ratios....

that's as far as i've got for now

thoughts? expertise?