Why Market Analysis is Important before investing

ImageMarket analysis studies the attractiveness and dynamics of market. Market analysis gives us the information about how the market is performing and what should we expect from the overall market situation. The knowledge of where the market is headed to is very important for making an investment decision. The market analysis aims to represent the overall position of the economy. If the overall market is expected to enhance, then the expected increase in the stock can be found by using the stock’s returns and historical sensitivity with the market returns, which gives an idea how the stock will move respective to the market movement. If the market is expected to go up and the relation between investment-stock is positive, then the stock is most likely to give more returns.

In a market analysis, the analysts should take into account the economic, legal, political, sociocultural, and competitive measures, with regard to the market size, growth rate, and the profitability ratios respective to the business. If the economic conditions are good in a market, then the consumer confidence would rise, which would lead to the higher consumption of goods and services in the market leading to the overall higher profits for the companies. These factors give us prediction as to where the market is expected to head, which can lead to a better investment decision i.e. Recently European legislators have relieved the emission status of the cars, the ease in the restriction has allowed the auto makers to sell such vehicles in the Europe, which were previously banned due to higher harmful gas emissions. This ease leads to the good news for the automotive industry, which will be reflected in the returns of such companies. Investment strategies have also placed importance on the market analysis.

The top-down approach to the investment decision-making starts with the market analysis, in which the market conditions and expected returns are forecasted, leading to the industrial analysis and then the company analysis within the industry. The top down investment strategists believe that the company’s performance in future does not depend solely on the company but depends on the overall economy, industry regulations, and outlook as well. Market analysis becomes more important if the investor is planning to invest in the foreign markets.

The market outlook helps investor determine where the specific market is going i.e. the growing middle class in Asia leads to higher investments in growing markets because of the expected increase in the performance of companies there. Emerging markets have given very good returns in the recent years much better than the developed markets because of the increasing consumption power of the middle class in such countries. The market analysis as a whole gives us a holistic view as to where the particular economy is going and an analyst can connect such expected trends to the companies, which gives good idea as to where the high growth is expected in the industry and then in companies leading to smart and more profitable investments.

Top Growing Industries

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Whether you are an investor or an entrepreneur, staying up-to-date with the changing trends in the economy is the key to survival in an increasingly competitive environment. There are many industries that are up and coming in the global economy, which has seen many structural changes in the past few years. Tapping into these potential industries can help you make the most of your capital, whether you are looking to invest in the short term or even thinking to start a business. So without further ado, we tell you about the top growing industries today.

1)      Mining Related Industries:

Mining has seen an increase in demand as major powers try to increase the supply of important raw materials such as oil and natural gas, which have seen surges in price in recent years. In order to combat the price inflation of these commodities, mining projects and related industries have become one of the fastest growing industries in the world. Equipment such as drills has seen a high sales growth but more importantly the service sector related to mining, which involves geologists and planners have seen a great increase in demand. Overall, activities such as drilling and geological activities have posted a 21% increase in sales in the last year.

2)      Oil Seed and Grain Farming

Not so long ago, many analysts pointed to the fact that the world was fast losing its potential to grow crops and that the global diet was becoming more homogenous as people are beginning to consume more or less the same crops, which includes staples such as wheat and rice. Not surprisingly then, oil seed and grain farming is also one of the top growing industries in the present time. Oil seed in particular has seen a demand boom in the past 5 years due to a shift in preferences of the consumers, whereas grains such as wheat and corn have remained in high demand as always. These particular industries posted a sales growth of about 20% in the last year.

3)      The Beverage Industry:

The global recession might have hit many industries but not Coca-Cola or Pepsi. Therefore it comes as no surprise that the beverage industry is also one of the fastest growing industries of 2014. Soft drinks and bottled water top the charts in this industry. But the growing demand for fresh juices and a consistently stable demand for alcohol has also made this industry one of the fastest growing industries with a sales growth rate of 20% in the last year.

4)      Machinery Manufacturing:

Due to the increase in growth in the agricultural and mining sector, demand for related machinery such as tractors, steam rollers etc. is at a peak, and therefore the machinery manufacturing industry makes the top growing industries list. This industry posted a sales growth of 18% last year.

5)      Crop Farming:

Besides the staple crops mentioned above, other important crops such as sugarcane and tobacco are in high demand worldwide. Cotton in particular has seen resurgence in demand since the end of the global recession, which in this industry has posted an 18% increase in sales growth last year.

Stock Analysis – Technical vs. Fundamental

ImageIf you are an investor you must have come across two terms quite frequently, which are Technical Analysis and Fundamental Analysis. Here I am going to present a brief explanation of both of these methods and will highlight some of the key differences.

Technical Analysis deals with the evaluation techniques, which are based on past stock prices and trends. In technical analysis we look at how a stock has performed in past and how has the different factors affected the price of that stock. We use different statistical methods and techniques to evaluate stocks. Based on all these prices we predict that how this stock is going to perform in future, what is the price of this stock going to be in future. We use different statistical techniques like regression, simulation etc. to calculate future returns. These methods also use some financial models and techniques to evaluate future returns.

In technical analysis we use price-based rules like moving averages, regression, relative strength index, business cycle, inter market and intra market pricing, and stock market cycles.

Whereas fundamental analysis, as the name suggests is applied at a fundamental level. It is applied to calculate the value of firm. It recognizes the current value of firm based on different factors and also considers probable variations because of some past trends. It looks at the value base on what the future aspects of the firm are going to be, and what are the opportunities over which the firm is going to capitalize in future. It also deals with threats, which a firm is facing, which can take the value of firm down in future. Based on all these factors, total value of a firm is calculated that is further used to calculate the value of firm’s stock.

Technical analysis is mostly used for securities and stock analysis as opposed to fundamental analysis, which deals with facts of company, market, commodity, and currency, while technical analysis analyzes just prices. For a good stock analysis, it is necessary to have both technical and fundamental analysis; that’s why all the good brokerage firms, trading groups and financial institutions have both fundamental and technical analysis teams.

Technical analysis is a widely used technique by financial professionals and traders and is mostly used by active day traders, pit traders and market makers. It was widely criticized in 1960s and 1970s by academics. Some of the recent studies have found that it gives positive results in 56 out of every 95 cases but there are also reported some other issues as well. Some of the very good academics say that is not consistent with the weak form and efficient-market hypothesis. But those in favor of technical analysis say that even if it does not predict future it does give some insight about trading opportunities. Based on all this it can be said that both of these techniques have their own shortcomings, and it is recommended to use both the techniques together.

 

What Are Non – Tradable Shares?

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Today Chinese Securities Market is a binary level system composited of tradable shares and non-tradable shares. These are special kind of shares enabling the holders to exactly the same rights as holders of ordinary shares except for public trading.

Chinese authorities have tried to deal with the difficulty of non-tradable shares on quite a few events, predominantly in the year of 1999 and 2001. In the first effort, two companies were nominated to sell their state shares to the floating investors. The research was not well established by the investors and within 15 days from the declaration of the allocation program the share price of the two companies chopped by 40%. The second effort failed badly in 2001 apparently because the offer predicted an equal pricing for tradable and non-tradable shares.

In January 2004, the Chinese government revealed officially NTS as a foremost barrier for domestic financial development and stated its assurance to face the problem in the immediate future.

During the years 2005 and 2006, the government of China executed a modification destined at eradicating the so-called non-tradable shares that are normally held by the politically connected official investors or the State, which were dispensed at the early stage of financial market enlargement. On September 5th, 2005, China Security Regulatory Commission delivered the “Measures on administration of split share structure reform of listed companies”, the main licensed paper containing the details about the execution of Non-tradable Shares reform. The reform accommodated the holders of NTS to pay the holders of tradable shares (TS) for the prospect to sell their shares in the future. Separately from the payment, the reform had very little direct instant impact on the structure of the Chinese stock market in the short run.

The strategies proven the following stages for the implementation of the reform include; the owners of Non-tradable Shares demand the board of directors to initiate the reform process, the panel must seek the assistance of an exterior sponsoring institution and of a law firm to draft the tender, the guarantor must refer the stock exchange about the possibility of the proposal and assemble a meeting with the significant market shareholders, The proposal needs a competent preponderance of two-thirds of the members. If the tender is accepted the board must expose the schedule for definite execution of the reform, finally, the trading is resumed after the investor meeting passing the completion of the reform.

Non-Tradable Shares have been allotted to the initiators of a corporation, business partners or workforces and assisted two core resolutions; to keep confidently in government’s hands the control of State-owned enterprises that were floated in the market, secondly to maximize initial public offering (IPO) proceeds.

Moreover, in detail the Government and the governing, supervisory authorities rapidly recognizing that the power of NTS created a problem for the market from some facts and visions. Firstly, the owners of Tradable Shares were characteristically minority shareholders with limited power to upset management results or decisions. Secondly, the limited free float existing made the domestic market extremely illiquid, unstable and hence liable to market manipulation and insider trading. Third, the incompetence of the domestic market prompted many valuable Chinese companies to list overseas. This unpleasantly affected native investors who disallowed to invest in the best companies, were trapped with holdings the less performing confined companies.

 

 

Free stock suggestions

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It is very important to analyze each and every aspect of a stock before investing. You can get this information from different sources. Free stock suggestions are available at different website like Bloomberg, Reuters, Google Finance, Yahoo Finance and bidnessetc.com. All of these websites offer a lot of free data and information. There are different portals where you can post your queries and you will get an answer to that. Another way to get free stock suggestions is to consult a friend who knows about finance and financial market.

You can use all these free sources to get suggestion about you investment decisions but you need to know a few basic things about stock investment. These things include a basic fundamental analysis of a stock and a basic knowledge of stock market. You need to know a lot about stock market; you should keep an eye on ups and downs of stock market and adjust your investments accordingly. If you are managing a portfolio of stocks you need to know the different aspects of all the stocks you are dealing with. For example if you are investing in textile industry and textile importers are likely to get subsidy for imports you need to know how this new information will reflect in stock price. You need to know how you have to adjust your portfolio in case of significant increase or decrease of a stock. You are managing a portfolio with a fixed proportion of each stock, if a stock prices increase the proportion of that stock in portfolio also increases and the total risk of the portfolio will also change. You need to adjust this portfolio to bring your risk to an optimal level. You should also learn some basic rules of finance. The most important thing to know is measurement and interpretation of risk. You should know how to calculate the risk of stock from past prices of that stock. You should also know about the factors which increase or decrease the risk of a stock. An investor should be well aware of the difference between financial risk and operating risk of the company and what is correlation between these two. If a company is operating such an environment where the cash flows are very unstable and there are abruptly of business then that company has a high business risk and such company should have a lower level of financial risk. Financial risk is mostly related to the leverage of the company, how much debt a company has defines the financial risk of the company. A high level of debt means that a company has a lot to pay in as debt repayments which increase the financial risk of the company. A company has to pay to its debtors first and anything left will be shared among shareholders. Another thing to consider is the stage of company whether it is in mature stage or is in growing stage. Many free stock suggestions are available at bisnessetc.com.

Inspiring Stories about Stock Investors

ImageI was going through bidnessetc.com and I encountered a story about Mark Zuckerberg, I was really impressed to read about how he changed the social network and have taken it to a whole new level. His story is very inspiring and a true example of entrepreneurship. There are many such examples that have changed whole industries in which they were operating. People include Bill Gates, Steve Jobs and many others like that. There are people like this in financial sector as well. One of the most known names is Warren Buffet; he has a marvelous history and a very inspiring story. He bought first share at the age of 13 this shows his level of risk taking and interest. He was known as a mathematics genius since his childhood and he has used his skills very well in industry. There are many other inspirational stories about stock investors.

Charles Brandes is one of those personalities; he is partner at Brandes’ investments. He manages a global equity fund of up to 30% returns in 2013. He is known for his investments in companies which are undervalued and have strong fundamentals. Brandes is very trusted name and their investment in any company can give that company a quick jump. He now manages $27 billion in assets which is down from $120 billion in 2007.

Neil McCarthy is a research chemist and started investing in stock market at the age of 34 in 1970s. His net worth today is about $2.1 million. He has made a lot of money from changes in the market. When stocks went down he bought more. His contribution to IRA and 401k was to his maximum and also matched his employer 100 percent. He has a huge pay off in 1990s bull market when some of his stocks were doubled in about 3 or 4 years.

He was different form several investors in a sense that he avoided technology companies because they didn’t make any sense to him. He wasn’t even impressed by price-earnings ratio of 200 to 300 percent. This style save him a lot when the market crashed and many of the investors lost a lot of money. He was able to maintain his millionaire status even at that time. At the time of his retirement he took a lump sum a put that in an immediate annuity. He was able to earn a big payout because the interest rates started to fall right after that. He is very good investor and is example for all other investors. His life story is very impressive and offers a lot of learning to all new investors.

 

There are many other examples like these people who have changes the whole financial services industry. These people have also contributed to regulation of the industry, many of the new regulations are placed just because of these people and now the market is much more secure to invest that a few decades ago. More of similar stories are available at bidnessetc.com.

IBM: Where Business machines stood and where they are heading?

ImageInternational Business Machines (IBM) Corporation is an Information Technology company that was incorporated in 1911. The company had been known as the biggest computer manufacturing company and system integrators. The company primarily operates in five segments, which are Global Technology services, Global Business services, Software, Systems and Technology, and Global Financing. Global technology services provide IT infrastructures and business process services to the customers. Global business services provide a platform of professional services and application management services. Software primarily consists of operating systems software, whereas systems and technologies provide business solutions to its customers ranging from storage capabilities to computing power. Global Financing invests in the financing assets, leverages and manages the risks associated to such investments. IBM recently acquired Cloudant Inc., which is a database service that enables developers to create mobile and web applications more easily and quickly.

IBM was a pioneer in the information and technology business half a century back and the company had sky rocketing revenues and market shares. The company had products, which could not be articulated by competitors and was considered the biggest computer company in the world. But in early 1990s, the company was in a lot of trouble, as it posted one of the biggest losses of those times in the American history. The company had missed a couple of technological advancements at that time. The company’s management lost their focus and direction during the high growth periods and it brought IBM to the brink of collapse. The new management, which took control of the IBM’s sinking ship, started with a huge restricting of the firm. The new management started forming strategic alliances; the first partnership was with Ogilvy and Mather, which was an E-business campaign, which showed the congruency of IBM’s service offerings with its purpose and brought the company back into cultural consciousness. Now the company has a stable business and revenues with thousands of customers across the globe. The company has acquired a cloud service provider SoftLayer Technologies Inc. last year for $2 billion and is integrating its existing hardware and data analytics with its services. IBM in the FY 2013 has beaten the earning per share but had a scarcity on the revenues.

The company’s management announced that the company is set to develop some new products, which will improve the data management, delivery, and integration and this will bring in more revenues for the companies. The company’s management is expecting an EPS of $18 in the Financial Year 2014. The changing trend that the customers are increasingly storing their data on the cloud networks rather than the onsite servers, which has limited the need for main frames or other hardware’s which resulted in the decline of companies sales in the first quarter of the FY 2014. But as proven by history the company has plans to keep itself in the high growth business. After acquiring SoftLayer Inc., i.e. a company, which is in cloud networking business IBM, is investing further $1.2 Billion in the Cloud computing since the recent trends have shown that this is the way forward in the technology business. The company is also working to deliver its Watson tools through the cloud computing, which will bring in more business for the company. IBM is also spending billions of dollars on developing a new group under the technology segment, which will analyze the information and provide the useful and insightful information about the data in simple context. The company over the last couple of quarters has seen a downturn but the future prospects look good for IBM and its stakeholders.