General discussion about Fundamentals & Stock Price

Long, short, Bitcoin, forex - Plenty of alternate market disuccsion.
Post Reply
switesh
Posts: 527
Joined: Mon Jul 11, 2011 8:43 am

I wanted to open a thread to discuss Fundamentals and general Stock price movements. While they don't always go hand in hand I always like to understand the reason behind a big move.

I believe some traders on this forum are also investors in the Equity markets (great place to put your betfair green to use).

I could certainly benefit from your thoughts/insights on this topic.

For example, looking at the attached chart of MSFT:

Firstly, I couldn't quite work out why there was heavy selling pressure on the 18th which resulted in approx 11% drop. It was a weekend move but I found no news or fundamentals to justify that drop.

Secondly, the recent 7% hike was due to Steve Balmer's retirement announcement. Why does Wall Street see this as a positive sign? Why is a CEO retirement a strong factor to alter the fundamentals of a company in a positive manner?

Would anyone care to shed some light please?
You do not have the required permissions to view the files attached to this post.
User avatar
Euler
Posts: 24701
Joined: Wed Nov 10, 2010 1:39 pm
Location: Bet Angel HQ

MSFT is probably undervalued if they can get a CEO it to exploit it's various assets, Ballmer has overseen one of the least successful periods in the companies history, so his departure presents an opportunity for a new broom.

Next CEO's are often good buying signals for strong companies that are underperforming.
Wildly
Posts: 229
Joined: Wed Nov 28, 2012 7:31 am
Location: Australia

http://www.slate.com/blogs/future_tense ... oft_s.html

http://www.newyorker.com/online/blogs/c ... ailed.html

Avoid investing in or working for any company that tries to manage their people like Ballmer did. I had the misfortune of working for another company that introduced employee ranking within departments. Even worse just prior to the introduction of that ranking system I'd moved to a new role within a high flying dept.

That brings back some ugly memories but it does make me want to stay self-employed or even better make a living trading sports.
Last edited by Wildly on Mon Aug 26, 2013 1:14 pm, edited 1 time in total.
andyfuller
Posts: 4619
Joined: Wed Mar 25, 2009 12:23 pm

switesh wrote:Firstly, I couldn't quite work out why there was heavy selling pressure on the 18th which resulted in approx 11% drop. It was a weekend move but I found no news or fundamentals to justify that drop.
From memory that was when they announced bad results and cut the price of their Surface tablet due to it not selling.

18th July was a Thursday, not a weekend btw.
User avatar
Euler
Posts: 24701
Joined: Wed Nov 10, 2010 1:39 pm
Location: Bet Angel HQ

I saw the surface on a trip to California before it was released and it was terrible, no doubt in my mind at that point that they had completely missed the point.

The had taken a good idea and made it worse! But MSFT has always had a history of merely copying others and not innovating.

Two trains of thought on this, you effectively outsource the hard and costly part of development also you never really steal a lead on rivals. But MSFT was able to get away with it because of their huge installed base.

I'm 'interested' in them at these prices and a new CEO.
User avatar
Euler
Posts: 24701
Joined: Wed Nov 10, 2010 1:39 pm
Location: Bet Angel HQ

switesh
Posts: 527
Joined: Mon Jul 11, 2011 8:43 am

Thanks Peter, Andy.

Got a reply from one of the advisor at Motley Fool AU, which is very similar to what you indicated:
"The drop in July was because of weak fourth-quarter results and the massive write-down on Surface tablets. The bounce on the Ballmer retirement news is because the market thinks he was holding the company back."
convoysur-2
Posts: 1110
Joined: Thu Jan 12, 2012 10:00 am

check this out..GOOGLE CAN PREDICT THE STOCK MARKET,,,,
http://myscienceacademy.org/2013/05/03/ ... ck-market/
andyfuller
Posts: 4619
Joined: Wed Mar 25, 2009 12:23 pm

Cheers for that link - an interesting read.
convoysur-2
Posts: 1110
Joined: Thu Jan 12, 2012 10:00 am

hi andy your welcome.
i know nothing about stocks but i thought it was very interesting.
Marc
convoysur-2
Posts: 1110
Joined: Thu Jan 12, 2012 10:00 am

owners are dumping GMO monsanto stock shares,,
http://www.trueactivist.com/hedge-funds ... ll-street/

we are legion.
we do not forget.
we do not forgive,
switesh
Posts: 527
Joined: Mon Jul 11, 2011 8:43 am

Downloaded spreadsheet data and had a quick play-around with their Balance Sheet & Income Statement for last 3 yrs from period ending 31/08/2012.

At first glance, their Inventory & Receivables look to be up overall, therefore I'm inclined to think that their GM products are obviously selling well (whether it is due to crafty sales techniques, or lobbying).

Slight drop in Intangibles. A bit baffling is the fact that their Goodwill is still strong despite GM products receiving a negative sentiment (though this isn't the first time it has happened).

I would've thought that Management would have cut down on R&D (Income Statement) due to genetic pollution, but that doesn't look to be the case. Income Statement didn't show any threat in Operating Expenses either.

Long Term Debt grew quite a bit in the recent year, don't know where that money was spent but the Cash-flow Statement reflected the Net Borrowings accordingly. It also showed growing Investing Activities.

Overall, Stockholders Equity was still Ok due to strength in Total Assets.

Judging by their Financial Statements, the business still looks good to me. The stock is overvalued though trading at approx 20 times P/E.

If I were to put on my Business Owner hat, I'd say I still like the business (leaving ethical issues aside and thinking as a Capitalist) and would certainly carry on with it regardless of Hedge Funds, Senior Management dumping the stock.

But putting on my Equity Investor hat, I'd be willing to patiently wait watch the heavy selling until the stock drops to around 3-4 times P/E. Current Book Value equates to around $25 per share. If not, I'll pass the deal.

This is how I read it, having never done Business or Investment (in public Equity) before. Would love to do both soon, IF (or EVER) BF trading pays off. That's the reason why I'm trading (to raise Capital for Business/Investment).

Would be great to hear the views of experienced Investors & Business Owners on this forum.
Post Reply

Return to “Trading Financial markets”