Bloomberg Market Concept-Equity

Mix Fin&fun
Jun 25, 2016
2 min read

1. Introducing the stock market

Black Monday…
Equity value is about half of bond, but the number of securities are far less than bonds
More delisting than IPO in US recently
S&P 500 (US companies-MEMBER to see who list): 10 industries- sub industries; index level * index contribution of company = points contribution of company=> points contribution of company *(1+stock price move)=new points contribution of company=>New-old=contribution (Index Pt column means->move index contribution)

Q: 1999-2014 if buy S&P 500 index->return can be calculated/but buy all stocks of S&P 500, lots companies changed

2. The nature of equities

More volatile
Q: In a booming economy, you would rather own a highly leveraged company
Dividend payment
Index return
Nominal return vs inflation

Q: as bonds can be sold before maturity, and can potentially go up in value a lot, bondholder can end up earning more than the yield; bond and equity investors can always lose 100% and no more

Financial or operating can ramp earnings which may ramp the share prices (multiply in value). Flight to safety is a reason for bonds to go up. Equity can be considered by some to be an “inflation hedge”, that is, less affected by inflation because companies tend to lift prices of their goods and service in line with inflation

3. Equity research

Earning announcement (quarterly release)
How to estimate future company earnings: industry classification/suppliers &buyers/revenue projections/ cost base

Q: long-term investor and companies suffer from quarterly release of earning (Earning release helps financial reporters)

4. Absolute valuation (discounted cash flow)

Five steps calculation: estimate long-term cash flow; estimate WACC; discount cash flow; total firm value (Market capitalization or value of equity –cash &equivalent +value of bond holder=firm value); divide numbers of shares =>fair share price
Pros: precise/anchored to earnings/disciplined thought process; cons: demands clairvoyance/laborious/ prone to subtle manipulation

5. Relative valuation

Dividend yield; Earning yield; P/E ratio (benchmark: compare itself/its peer/ the market)

Real GDP driver->corporate earning->share price

Pros: intuitive/quick & easy/does not demand long-term forecasts; cons: imprecise/hard to find truly comparable companies/presupposes that the company you are comparing it to is itself fairly valued

Terminal Functions:

Pitch: HP (historic price), FA (financial analyst), RV (relative value), beta, waco, PC (peer correlation), CF (company filling), EE analyst coverage (how Morgan Stanley see), dividend district, TRA (total return), GP (graph, line chart) use security/study to add more security line, CN (company news), N (general news), CAST (capital structure), DDIS (debt distribution debt payment), BI (Bloomberg industry), EQS (equity screening what to invest, PM does all the time set criteria, generate investment ideas), WEI (world equity index), OMON (option)/GIV (graph intergrade volatility)

SPLC: suppliers; GP, GIP (today’s price), BRC (research broker report)

Fixed income: e.g. IBM 5 bond page, DES (bond description), YAS (yield), COMB (comparable bond), GCDS (insurance…protection on debt), BTMM (LIBOR, TB)

MA (merge & acquisition)

COUN (info about country)

WB (world bond)

ECST (world statistics countries)

ECTR (trade flow import/export)

ECFC (economic forecast)

WCRS (world currency)

FXC (currency rate matrix)

CM (commodity)

BMAP (commodity map-oil)

Create portfolio: PRTU, drifting weight?

CTM: future contract