Emory Trade

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Emory Trade

• October 17, 2005

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Board of Directors

• President Michael Becker
• Co-CEO Simon Tan
• Co-CEO David Burton
• CFO Kevin Cheng

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Executive Board

• VP of Public Relations Ashley Terry
• Asst. VP of PR Eric Joannu
• VP of Accounting Ryan Huff
• Asst. VP of Acct. Niles Lingard
• VP of Fantasy Stock Market Game David Olscamp
• VP of Membership Sam Shapiro
• VP Event Coordinator Stephen Pack
• VP Market Analyst Suhan Islam

(Note Positions listed in no particular order)
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Agenda

• Prize for Attendance! Sign up for next car wash
  (10/29)!
• Introduction Future of Club (Michael)
• 100 Fantasy Game winner Curt Champagne
• Fantasy Game (David)
• Stock Analysis (Suhan)
• Saturdays Car Wash Fox 5 (Niles)
• Next meeting November 14th!!

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Attendance 2nd Car Wash

• Sign the attendance sheet!
• Prize for best attendance at end of semester!
• 2nd Car Wash Oct 29th
• Sign-up with your available times!
• (1130 am 3 pm)

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Introduction, Future of Club

• Presented by Michael Becker, President

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Summer Fantasy Game Winner!

• Curt Champagne receives a 100 check!
• Congratulations!
• How can you win?
• His strategies!

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Next Fantasy Game Marketocracy

• David Olscamp Fantasy Game VP

Marketocracy
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Stock Analysis

• Suhan Islam VP Market Analyst

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Hewlett-Packard (HPQ)

• Stock Analysis

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Random Terms

• Quarter
• Most Recent Quarter (MRQ)
• Fiscal Year
• Twelve Month Period (FY)
• Trailing Twelve Months (TTM)
• Most recent twelve months moving measurement.

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Types of Analysis

• Fundamental
• Qualitative Analysis
• Technical

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Background

• Hewlett-Packard Company provides products,
  technologies, solutions, and services to
  consumers, businesses, and governments worldwide.
  
• It operates in seven segments Personal Systems
  Group, Imaging and Printing Group, Enterprise
  Storage and Servers, HP Services, HP Financial
  Services, Software, and Corporate Investments.
• They sell commercial personal computers, consumer
  PCs, workstations, handheld computing devices,
  digital entertainment systems, calculators and
  other related accessories, and software and
  services for commercial and consumer markets.

• What do they do?

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Why is HP Interesting

• Technological company with growth potential
• Turn around situation with new CEO
• Strong Revenue growth
• Brand-name recognition
• Large-cap safety

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Fundamental Analysis

• Also known as quantitative analysis
• Primarily involves looking at historical
  performance to predict future performance
• Specifically looks at revenue, expenses, assets,
  liabilities, and all the other financial aspects
  of a company
• Find this data in 10K (sec.gov) Balance Sheet,
  Income Statement, Cash Flow Statement

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Current Ratio

• What is it?

• Definition Current Assets / Current Liabilities
• Current assets are short-term, less than one year
• Current Assets include Cash, Inventory,
  Short-term receivables
• Current Liabilities include Short-term payables
• General idea A company is generally considered
  financially healthy when current assets are equal
  or higher than current liabilities
• Current Ratio of 2 is superb, but 1.35 is good
  the higher the better
• HP Current Ratio
• 1.429 per most recent quarter

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Debt to Equity Ratio

• What is it?

• Definition Long-Term Debt / Equity
• Long-Term Debt
• Equity Total assets Total Liabilities
• General idea A higher debt/equity ratio
  generally means that a company has been
  aggressive in financing its growth with debt
• New or growth companies tend to have higher debt
  since they are growing. However, too much debt is
  never good
• HP Long-term debt/ Equity Debt/Equity Ratio
• 5.77 B / 37.47 B 0.154 (mrq)
• Lower the ratio the better, but its a
  comparative tool within an industry
• Recommendation 0.1 (less than .0338 is great)

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Price to Earnings Ratio

• What is it?

• Definition Price / Earning
• The price of the stock / companys yearly
  earnings per share
• Or Market Capitalization/Net Income (use diluted
  of shares)
• Earnings Earning in EPS (Earnings per share)
• General Idea The higher the P/E ratio, the
  higher the speculation of the companys future
  earning performance
• High P/E means market is optimistic ? overbought,
  lots of potential growth
• HP Price / Earnings Ratio
• 27.54 / 1.05 26.33 (Trailing Twelve Months)
• Generally PE of 15 is good, but its a
  intra-industry comparative tool. Tech and growth
  companies have higher PE

• Which has the highest and lowest PE? Why?
• GE, Dell, HP, Google, Starbucks or Exxon

Google 89 Starbucks 46 HP 26 Dell 24 GE
20 Exxon 13
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Growth

• Definition The compounded annualized rate of
  growth of a profit, earnings, revenues, etc.
• Relative measurement (percentage)
• (This years profit Last years profit) / (Last
  years profit)
• General Idea Higher the growth rate, higher the
  risk.
• Want to look for growth for higher potential
  return
• Your ability to take on risk determines how many
  growth stocks you want to have
• Calculated by (Year 2 Year 1 / Year 1)
• Usually read from sources
• HP Quarterly Revenue Growth 9.90 (yoy)
• Finance.yahoo.com

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Earnings

• Earnings The net income of a company during a
  specific period. Generally, but not necessarily,
  referring to after-tax income.
• Earnings are perhaps the single most studied
  number in a company's financial statements. They
  show how profitable a company is.
• Guidance has a role in the market because it
  provides information that can be used by
  investors to analyze the company, evaluate
  management, and create forecasts. Careful because
  numbers are internally generated and maybe
  somewhat biased
• Earnings Estimate An analyst's estimate for a
  company's future quarterly or annual earnings.
• Analysts use forecasting models, management
  guidance, and fundamental information on the
  company in order to derive an estimate.
• Earnings Growth Rate indicators that reflect the
  opinions of industry analysts as to the growth
  potential of a company's earnings.
• HPQ Earnings Estimates

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Insider Trading

• Insider Trading The buying or selling of a
  security by someone who has access to material,
  nonpublic information about the security.
• Insider trading can be illegal or legal depending
  on when the insider makes the trade
• Illegal when the material information is still
  nonpublic. Trading while having special knowledge
  is unfair to other investors who don't
  have access to such knowledge. 
• Includes tipping others when you have any sort
  of nonpublic information. Directors are not the
  only ones who have the potential to be
  convicted of insider trading. People such as
  brokers and even family members can be guilty.
• Legal once the material information has been made
  public, at which time the insider has no direct
  advantage over other investors.
• The SEC, however, still requires all insiders to
  report all their transactions. 
• An executive, director or major shareholder sold
  a small number of shares recently. (Neutral)
• Planned versus Unplanned
• HPQ Insider Transactions

• Is it legal?

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Major Holders

• Usually the largest shareholders of a company are
  not individuals but rather institutions
• Analysis of Major Holders provides insight to
  what the some of the best managers think the
  stock is worth and in what capacity growth,
  value, blue chip
• HPQ Major Holders

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Qualitative Analysis

• How does the company compare to competitors
• Is the companys business model working
• How are the officers of the company
• Is there any extraordinary problems with the
  company
• SEC investigation

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Competitors

• How does key statistics compare to competitors
  PE, Net Income, EPS
• HP (27.35) is more pricey than its competitor
  Dell (32.93) and is not as efficient as Dell when
  it comes to making custom computers.
• Unlike Dell, HP still relies on vendors to sell
  their product. However price comparisons of the
  two firms direct purchase programs do not show
  great disparity
• HPQ and its Competitors

• Who are HPs biggest competitors?!

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Business Model

• Very specific to the Company
• HP
• HPs retail computers are organized into two
  units HP and Compaq
• Compaq is made primarily for licensing to
  corporations or multiple unit buyers, its
  technology focuses on efficiency
• HP unit is primarily made for private consumers
  and its technology focuses on high quality media
  both audio and visual
• HP does significant Research and Development that
  it showcases
• Nanotechnology

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Moving Averages

• An average of data over a certain time period
  (ex 50 day, 200 day)
• Note Above 200-day moving average and its
  bouncing off the 50 day moving average
• Conclusion Its support is the 50 day moving
  average

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Relative Strength Index

• Technical indicator that compares the days that a
  stock finishes up against when it finishes lower
• Overbought (gt70) vs. Oversold (lt30)

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Stochastic Oscillator

• Compares a security's closing price to its price
  range over a given time period.
• Technical momentum indicator
• The oscillator's sensitivity to market movements
  can be reduced by adjusting the time period or by
  taking a moving average of the result
• The theory behind this indicator is that in an
  upward-trending market prices tend to close near
  their high, and during a downward-trending
  market, prices tend to close near their low

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Bollinger Band

• A band plotted two standard deviations away from
  a simple moving average
• Because standard deviation is a measure of
  volatility, Bollinger Bands adjust themselves to
  the market conditions. When the markets become
  more volatile the bands widen (move further away
  from the average), and, during less volatile
  periods, the bands contract (move closer to the
  average)
• This is among one of the most popular technical
  analysis techniques. The closer the prices move
  to the upper band, the more overbought the
  market, and the closer the prices move to the
  lower band, the more oversold the market.

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Bollinger Band (cont.)
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Moving Average Convergence

• A trend - following momentum indicator that shows
  the relationship between two moving averages of
  prices.
• The MACD is calculated by subtracting the
  26-day exponential moving average (EMA) from the
  12-day EMA.
• A 9-day EMA of the MACD, called the "signal
  line", is then plotted on top of the MACD,
  functioning as a trigger of buy and sell signals

• Crossovers - When the MACD falls below the signal
  line it is a bearish signal indicates possible
  time to sell.
• Conversely, when the MACD rises above the signal
  line, the indicator gives a bullish signal, and
  indicates that it may be time to buy.
• Divergence - When security price diverges from
  the MACD, it signals the end of the current
  trend. 
• Dramatic rise - When MACD rises dramatically
  signals its overbought will soon return to
  normal levels.
• The shorter moving average pulls away from the
  longer-term moving average.

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195 Raised _at_ Saturdays Car Wash!
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Thanks for coming!

• Questions?
• Dates to Remember
• Next meeting November 14th!
• Next Car Wash Saturday, 10/29