1. Stock Research
2. Where To Gather Information
3. Form 10k and 10Q
4. Financial Ratios and Metrics
5. Bull vs Bear Markets
7. Reading Financial Statements
8. How Much Should You Invest?
— Edit tomorrow Dec 17, 2020
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Quantitative vs Qualitative Stock Research
okay so let’s actually talk about stock research here first of all let’s discuss quantitative versus qualitative research now I suggest to take out a pen take out a piece of paper I hope you already did this but there’s two really strategies for looking at companies one of them is qualitative research so this is something along the lines of looking at a company’s culture looking at the the model of the company looking at their vision and even the leadership of a company for example this is very important because if you are just looking at the financials and the fundamentals and you’re looking at the numbers but you’re not looking at who’s the CEO is the CEO Pappajohn because that might be a problem so you want to make sure that you are looking at a number of things throughout the culture of a company making sure that there’s no issues within that some potential problems I’ll give you an example here looking at Facebook like Facebook a lot of people are a little bit wary about Facebook because of some of the things that they’ve done in the past we saw the cam bridge analytical scandal so qualitative research is very important but I would argue that most people probably spend about 20% of their effort on qualitative research and then 80% of their effort on quantitative which i think is a reasonable amount to go for so most of the time that I spend when I look at investments is actually focused on the financial numbers rather than that qualitative things like looking at Facebook and Mark Zuckerberg and looking at they’re prone to maybe more scandals in the future those are all things that you do want to take into consideration but quantitative the quantitative approach is much more focused on looking at the actual hard facts and the numbers from this now what do you actually get information from when you invest into a stock there’s a couple ways you can do this one of them is through just the brokerage firm that you have so if you’re using Vanguard or using fidelity a lot of these companies a lot of these brokerage firms that you can sign up for actually have their own research platforms within that so if you want to buy some stocks or look at their earning reports then you can do most of that through one of your brokerage firms that you have through your account it should be pretty straight forward from that but what I think is one of the best ways in terms of gathering information to learn about a company let’s say that you’re really interested in investing into Walmart stock you think about investing into it you’re not quite sure so you want to learn more about it you want to learn okay well how does this company’s financial statements look and so one thing that you can do is to go to that company’s Investor Relations report so a lot of this is going to be on their Investor Relations page the best way to find this is just through a simple Google search or most companies if you go to their website and you scroll all the way down let’s see if Walmart has one on their home page if you scroll all the way down to the bottom you’ll be able to actually just find their Investor Relations page so let me scroll down to the bottom of Walmart and see if they have it on here and it looks like they don’t have it on here but you can certainly find it if you start to click around but as I said I would suggest doing a quick google search and then you can find it see so we just click on investors here and this will take us to their investor relations page which at this point you’re gonna see a couple of things on most companies websites especially if they are on the major stock exchanges around the world they’re going to be regulated and sent in the terms of what types of information they have to actually release to the public so it’s really cool about this is that if you’re investing in two stocks that are on the major stock exchanges then you’re going to actually have a lot of information available to you so one thing that we see is something called a Form 10-k this is going to be their annual report looking at the past year talking about the numbers from the past year and then talking about their projections for the future so for example what they believe is going to happen throughout 2020 they laid that out usually we’re gonna see this happen right around the turn of the calendar year although it might depend for some companies so what I would suggest doing is downloading what we call the Form 10-k this is probably going to be roughly about a hundred pages most companies it might be over a hundred pages for that company’s 10k within here I want you to be a little bit careful because just a little bit of a warning that this is written by the company so they’re obviously going to try to spin it in a very good light they want people to invest into their company this is their annual report that goes out to their investors and so they’re gonna try to spin it in a very good light so just make sure that you’re doing your due diligence there and doing thorough research for all of that now there’s also going to be things called 210 Q’s which is going to be essentially just sort of an update every quarter of what they’re thinking about for the next quarter based off of looking back on their 10k so if we’re in quarter three they might reference that say our projections were a little bit low I think we’re gonna outshoot that for the next quarter or the past quarter we did better so the ten Q’s in the 10k is some of the best places to get information about a company you’re gonna learn a lot just from those trust me if you read a hundred pages of a Form 10-k from something like Walmart you’re gonna learn a lot about that company alright now I’m gonna give you a little bit of homework things that I want you to really research more after this video because for the sake of this we can’t crazy in-depth on every single topic here because this is something that does take many years to really master these topics but what I want you to do is start to learn about different ratios and financial metrics that we can use to essentially value a company or see if this company is volatile if it is a company that is likely undervalued or overvalued there’s going to be some different indicators and ratios that we can use one of them known as the price to earnings ratio this is the p/e ratio there’s something called earnings per share we can look at return on equity return on assets and then there’s also other ones as well if we go to something like Yahoo Finance here you’re gonna see a lot of things that maybe if you’ve never done this before it might look like hieroglyphics you’re not quite sure about it so we’ll just kind of run through some of these here so market cap is the total overall valuation of a company so if the market cap of a company is a trillion dollars which is only a couple of companies who have hit that mark that is going to be well first of all quite large but that is the overall valuation of the company so we take the number of shares multiplied by the stock price and that is going to give us the market cap for a company look at some other ones here something like beta this is going to essentially sort of indicate whether this company is a volatile stock or if it’s not very volatile so the beta of 1 is going to be average and then if you see a beta below 1 that’s going to mean that it’s less volatile than most other stocks so looking at Walmart here the beta here on Yahoo Finance as of today it says that is 0.4 3 this means that Walmart stock is less volatile and volatile means that it’s less likely to have massive jumps up or massive jumps down so if the market for example comes crashing down Walmart stock is probably less likely to come crashing down as hard but also if the market starts to really boom Walmart stock might be less likely to really see some massive growth as well so it’s more stable versus if the beta here for Walmart or for a company was 2 3 4 if it was a lot higher then that could indicate that this stock is probably jumping around a lot more a higher beta is not necessarily a bad thing it just means that there’s going to be more volatility in it and then there’s other things as well looking at the earnings date that is generally we’re gonna see companies release earnings reports every quarter so four times per year they’re going to get on conference calls and probably the CEO and a number of other people are going to discuss the earnings from the past quarter from quarter one from quarter two from quarter three and they’re going to talk about this what’s great about this is that you can actually listen in to a lot of these earnings reports and a lot of these earnings calls to see how a company is doing and if they over report earnings or if they under report earnings that’s going to have a big effect on stocks so this is something that you do want to very much be aware of that if you’re looking at a stock there’s going to be you’re probably gonna see sometimes within the markets where the stock jumps a lot or if it comes down a lot maybe a couple times per year or about three or four times per year a lot of that is based off of the earnings because when companies get on these calls sometimes they say our earnings are much better than what we thought we were going to do we pulled in a lot more money last quarter suddenly the stock in a lot of cases goes up because people get more excited and more bullish on a company let’s quickly talk about bullish versus bearish just to clear those up here bullish if you’re bullish on the stock market or if we are in a bull run it means that is going up you believe that is going up versus bearish on a market or in a bear market and that is going to be when the markets are going down they’re in a slump right so that is something just some terminology there that we can kind of clear up but looking at some other ones here as well the 52-week range a lot of that is kind of self-explanatory looking at the stock price that’s self explanatory volume is just how much that stock is being traded so if we see a big uptick in volume that could also spur some more volatility as well but that is something that we want to look at and then another one is is dividend okay so thinking about a dividend of a stock the best way to explain this in very simple terms is that some companies in with with the money that they’re making they choose to give some of that money back to the shareholders rather than reinvest it into their own business back into the company they’ll choose sometimes to actually pay out dividends to their shareholders so for example here with Walmart you’re going to see a dividend of $2 in 16 cents so what this means here is that Walmart’s dividend of $2 and 16 sense they might be splitting this up over four different quarters so you might expect to get 1/4 or 25% of $2 and 16 cents every three months from Walmart and you can actually just get this in cash as a cent as a check although most likely most companies are just going to deposit it into your account and it’s essentially it’s sort of like a thank-you from a company for investing into that company now that’s that’s probably a terrible way to put it but it is just a piece a small amount of money that they are giving back to their shareholders for owning that stock so instead of reinvesting it they’re just giving back to their shareholders some stocks you’re gonna see how pivot ends that are very high for example you might see a stock that has a dividend of 10% annually actually a lot of real estate ones that I see have dividends of 10% and so if a stock is $100 and the dividend is roughly about 10% you might expect to get $10 extra in cash by the end of the year split up throughout four quarters sometimes they pay monthly dividends by the end of the year that that company is going to be paying you I just want to give you a little bit of forewarning on this be very careful with dividends I sort of just sort of view them as a cherry on top I don’t really invest for dividends for the purpose of dividends the one thing that I want you to be careful with is one mistake that I made when I first started investing where I would look at stocks I was looking at companies and I would say this one company has a 15 percent dividend or 20 percent dividend and I would invest into it based off of that not realizing that some of these companies dividends were not sustainable amounts of money that that they were paying out and so I would end up losing money because I was investing into stocks that had 20% dividend but they couldn’t sustain that dividend they couldn’t pay out 20 percent per year because they weren’t making that much money and so they ended up going bankrupt some of those companies and it was a terrible fiasco so just be very careful with that view it as a cherry on top not really a primary reason for investing a lot of companies that are what we’re gonna say are well established blue chip stocks companies that have been around for a long time like to pay dividends so a lot of these older companies like like Ford General Motors Walmart here a lot of these less volatile kind of well-established companies a lot of the ones and the Dow Jones for example pay out dividends as well those are some of the things that we wanted to run over here we’re actually on Yahoo Finance and we might as well just stay on Yahoo Finance to show you some of these other things that we can look at here so if we actually click on financials and this is where we can find a couple of different financial statements from a company so there’s three big primary financial statements that we’re gonna look at here today in this video and that is going to be the balance sheet then we’re gonna look at the income statement and the statement of cash flows what I would suggest doing is if you really want to learn about this I would really suggest taking an entry level accounting class or reading a couple of books about accounting to really understand this process if you’ve taken an accounting class in college or even in high school I don’t know if high schools all for them mine certainly didn’t but if you’ve taken an accounting class you’re gonna find this to be much easier to understand for others it might be a little bit more difficult but this is still going to be very very helpful so just looking at this here this is the income statement for Walmart we can see a lot of things on here that are very relevant like the revenue we could look at the past few years for revenue see whether it’s been increasing or decreasing this is one that’s obviously very important to take into consideration then we can also look at some very other important things as well like net income how is the income of a company is it increasing or decreasing what’s the overall trend sometimes you’re gonna see companies that are reporting lower and lower income but they’re still doing better as a company sometimes we see companies like Amazon for example at some times where their income their net income is lower but it’s because they’re putting money they’re funneling money back into certain areas so really what I focus on most is the revenue of a company but you want to look at their costs and where their costs are coming from so if you see a massive uptick in the cost of a company’s employees and and and they’re paying their employees a lot more and suddenly they have a big extra cost for different legal disputes that they’re dealing with these are all things that you are going to want to really delve into to make sure that you’re understanding the financial statements from these companies so yes this is the income statement here that we can click over to the balance sheet this is going to be very simply it’s going to be assets vs.
Liabilities so we can see the number of assets that these companies have on their book here once again I would suggest just learning a little bit of about about accounting to really kind of learn more about this we do have some other videos on this so if you want to kind of delve into a little bit more you certainly can but we look at their total assets we look at the property that they own the stores that they have and then we look at their liabilities what type of debt do they have who do they owe money to how much money do they owe this is all where you’re gonna find this in this balance sheet here obviously the total assets is going to balance with the total liabilities and the total stockholder or shareholder equity so that’s going to be the balance sheet and then quickly let’s hop over to the cash flow statement which is where you’re going to see a number of things in terms of the actual money coming into a company so I suggest taking a deep look at each one of these I think there’s going to be some great videos that we’ll put out in the coming weeks on actually really trying to dig deeper into these but once again some of the best ways to do this is through reading books now I have a number of books here I think these financial books about four for dummies are some of my favorites this one about investing it’s an all in one book there’s some great ones about the stock market I don’t know why people laugh about these for dummies books I think they’re actually really great to learn so much about investing so I will suggest picking up some of these I really do think that they’re just so helpful but this one here the intelligent investor is probably arguably the greatest investing book of all time a lot of people really praise this book a lot I’ve read it a number of times and I’ve gotten so much value out of it that I would suggest reading this especially if you’re interested in building wealth over a long period of time now there’s a couple things that we do need to mention here one of them being that it’s okay if you lose some money at first but it’s important to start with a sort of small amount of money now this is something that I like to advise people on once again I’m not a financial advisor but I would suggest starting with a small amount of money in the stock market and then building it up over a long period of time because as I said some of the best place to learn is through reading books but the other best way to learn is through your mistakes people make mistakes and it’s very rare to see somebody jump into the stock market start to absolutely crush it and not make any mistakes people slip up at some point they have a lack in judgment they don’t see this one thing within a company that they should have realized and suddenly they end up losing a lot of money so the biggest tip that I can have for you is start with a small amount of money something that you can’t afford to lose so if you are living paycheck to paycheck and you have no money whatsoever then maybe just start with fifty dollars or a hundred dollars in the stock market and then over time over the months over the years you can start to put more money in it we get your feet wet and then start to jump in and bigger and bigger later on down the road once you start to really learn as much as possible so yes what I would suggest doing start today if you’d like to start today start investing into some stocks today but start with a very small amount of money I’ll leave some links to those brokerage firms down below and I think what I’m gonna do is I’m actually gonna create a group I don’t know if it’s give me a Facebook group or maybe a discord I’m gonna leave a link for that down below maybe we’ll do a discord for people who aren’t interested in investing into the stock market so that we can all talk about stocks together in some type of group chat I never really did this before and but I think it would really help a lot of people out and once again make sure you subscribe to the channel if you found any value in this I would HIGHLY appreciate if you follow me on Instagram feel free to send some questions over there I try my best to respond to those questions but I can get kind of difficult if I get a number of people asking big kind of in-depth questions they can get pretty difficult so I hope you can understand that but thank you for watching I hope you really found some value in this video I love creating these videos it really just makes me happy when I see people starting to invest into the market so thank you for watching investor your own risk remember that you and only you are responsible for the investment decisions that you make thank you everybody have a wonderful day and I’ll see you in next week’s video